Concept explainers
From Recording Transactions (Including Adjusting Journal Entries) to Preparing Financial Statements and Closing Journal Entries (Chapters 2, 3, and 4)
Alison and Chuck Renny began operations of their furniture repair shop (Lazy Sofa Furniture, Inc.) on January 1, 2017. The annual reporting period ends December 31. The
Transactions during 2018 (summarized in thousands of dollars) follow:
- a. Borrowed $21 cash on July 1, 2018, signing a six-month note payable.
- b. Purchased equipment for $18 cash on July 2.
- c. Issued additional shares of common stock on July 3 for $5.
- d. Purchased additional equipment on August 4, $3 cash.
- e. Purchased, on account, supplies on September 5 for future use, $10.
- f. On December 6, recorded revenues in the amount of $65, including $9 on credit and $56 received in cash.
- g. Paid salaries and wages expenses on December 7, $35.
- h. Collected accounts receivable on December 8, $8.
- i. Paid accounts payable on December 9, $11.
- j. Received a $3 deposit on December 10 for work to start January 15, 2019.
Data for adjusting journal entries on December 31:
- k. Amortization for 2018, $3.
- l. Supplies of $4 were counted on December 31, 2018.
- m.
Depreciation for 2018, $2. - n. Accrued interest on notes payable of $1.
- o. Wages earned but not yet paid, $3.
- p. Income tax for 2018 was $4 and will be paid in 2019.
Required:
- 1. Set up T-accounts for the accounts on the trial balance and enter beginning balances. If you are completing this problem in Connect using the general ledger tool, this requirement will be completed for you.
- 2. Record journal entries for transactions (a) through (j).
- 3. Post the journal entries from requirement 2 to T-accounts and prepare an unadjusted trial balance. If you are completing this problem in Connect using the general ledger tool, this requirement will be completed for you using your answers to requirement 2.
- 4. Record adjusting journal entries (k) through (p).
- 5. Post the
adjusting entries from requirement 4 and prepare an adjusted trial balance. If you are completing this problem in Connect using the general ledger tool, this requirement will be completed for you using your previous answers. - 6. Prepare an income statement, statement of
retained earnings , and balance sheet. - 7. Prepare the closing
journal entry . - 8.
Post the closing entry from requirement 7 and prepare a post-closing trial balance. If you are completing this problem in Connect using the general ledger tool, this requirement will be completed for you using your previous answers. - 9. How much net income did Lazy Sofa Furniture, Inc., generate during 2018? Is the company financed primarily by liabilities or stockholders’ equity?
1.
Prepare the necessary T-accounts.
Explanation of Solution
T-account:
T-account refers to an individual account, where the increases or decreases in the value of specific asset, liability, stockholder’s equity, revenue, and expenditure items are recorded.
This account is referred to as the T-account, because the alignment of the components of the account resembles the capital letter ‘T’.’ An account consists of the three main components which are as follows:
(a)The title of the account
(b)The left or debit side
(c)The right or credit side
Prepare the necessary T-accounts as follows:
Cash (A) | |||
Beg. | 5 | b | 18 |
a | 21 | d | 3 |
c | 5 | g | 35 |
f | 56 | i | 11 |
h | 8 | ||
j | 3 | ||
Bal. | 31 |
Equipment (A) | |||
Beg. | 6 | ||
b | 18 | ||
f | 3 | ||
Bal. | 27 |
Software (A) | |||
Beg. | 12 | ||
Bal. | 12 |
Accounts Payable (L) | |||
Beg. | 7 | ||
i | 11 | e | 11 |
Bal. | 6 |
Salaries and Wages Payable (L) | |||
Beg. | 0 | ||
o | 3 | ||
Bal. | 3 |
Deferred Revenue (L) | |||
Beg. | 0 | ||
j | 3 | ||
Bal. | 3 |
Retained Earnings (SE) | |||
Beg. | 4 | ||
CE1 | 9 | ||
Bal. | 13 |
Supplies Expense (E) | |||
Beg. | 0 | ||
l | 8 | ||
CE1 | 8 | ||
Bal. | 0 |
Amortization Expense (E) | |||
Beg. | 0 | ||
k | 3 | ||
CE1 | 3 | ||
Bal. | 0 |
Accounts Receivable (A) | |||
Beg. | 4 | ||
f | 9 | h | 8 |
Bal. | 5 |
Accumulated Depreciation (xA) | |||
Beg. | 0 | ||
m | 2 | ||
Bal. | 2 |
Notes Payable (short–term) (L) | |||
Beg. | 0 | ||
a | 21 | ||
Bal. | 21 |
Interest Payable (L) | |||
Beg. | 0 | ||
n | 1 | ||
Bal. | 1 |
Common Stock (SE) | |||
Beg. | 15 | ||
c | 5 | ||
Bal. | 20 |
Service Revenue (R) | |||
Beg. | 0 | ||
CE1 | 65 | f | 65 |
Bal. | 0 |
Depreciation Expense (E) | |||
Beg. | 0 | ||
m | 2 | ||
CE1 | 2 | ||
Bal. | 0 |
Interest Expense (E) | |||
Beg. | 0 | ||
n | 1 | ||
CE1 | 1 | ||
Bal. | 0 |
Supplies (A) | |||
Beg. | 2 | ||
e | 10 | ||
12 | |||
l | 8 | ||
Bal. | 4 |
Income Tax Payable (L) | |||
Beg. | 0 | ||
p | 4 | ||
Bal. | 4 |
Salaries and Wages Expense (E) | |||
Beg. | 0 | ||
g | 35 | ||
o | 3 | ||
CE1 | 38 | ||
Bal. | 0 |
Income Tax Expense (E) | |||
Beg. | 0 | ||
p | 4 | ||
CE1 | 4 | ||
Bal. | 0 |
Note:
CE-Closing entry
2.
Record the necessary journal entries for transactions (a) to (j).
Explanation of Solution
Record the necessary journal entries for transactions (a) to (j) as follows:
Date | Account Title and Explanation | Debit ($) | Credit ($) | ||
a) | Cash (+A) | 21 | |||
Notes payable (Short-term) (+L) | 21 | ||||
(To record cash borrowed on note) | |||||
b) | Equipment (+A) | 18 | |||
Cash (-A) | 18 | ||||
(To record purchase of equipment) | |||||
c) | Cash (+A) | 5 | |||
Common Stock (+SE) | 5 | ||||
(To record issued common stock for cash) | |||||
d) | Equipment (+A) | 3 | |||
Cash (-A) | 3 | ||||
(To record Purchase of additional equipment) | |||||
e) | Supplies (+A) | 10 | |||
Accounts payable (+L) | 10 | ||||
(To record supplies purchased for future use) | |||||
f) | Cash (+A) | 56 | |||
Accounts Receivable (+A) | 9 | ||||
Service Revenue (+R, +SE) | 65 | ||||
(To record service revenue earned during the year 2018) | |||||
j) | Salaries and Wages Expense (+E, -SE) | 35 | |||
Cash (-A) | 35 | ||||
(To record salaries and wages expense incurred during 2018) | |||||
h) | Cash (+A) | 8 | |||
Accounts Receivable (-A) | 8 | ||||
(To record cash collected on customer’s account) | |||||
j) | Accounts payable (-L) | 11 | |||
Cash (-A) | 11 | ||||
(To record cash paid to creditors) | |||||
k) | Cash (+A) | 3 | |||
Deferred Revenue (+L) | 3 | ||||
(To record receiving of customers deposit before doing work) |
Table (1)
3.
Prepare an unadjusted trial balance from requirement 2.
Explanation of Solution
Incorporation L&S | ||
Unadjusted Trial Balance | ||
At December 31, 2018 | ||
(in thousands) | ||
Account Titles | Debit ($) | Credit ($) |
Cash | 31 | |
Accounts Receivable | 5 | |
Supplies | 12 | |
Equipment | 27 | |
Accumulated Depreciation–Equipment | 0 | |
Software | 12 | |
Accumulated Amortization | 3 | |
Accounts Payable | 6 | |
Notes Payable (short–term) | 21 | |
Salaries and Wages Payable | 0 | |
Interest Payable | 0 | |
Income Tax Payable | 0 | |
Deferred revenue | 3 | |
Common Stock | 20 | |
Retained Earnings | 4 | |
Service Revenue | 65 | |
Supplies Expense | 0 | |
Salaries and Wages Expense | 35 | |
Depreciation Expense | 0 | |
Amortization Expense | 0 | |
Interest Expense | 0 | |
Income Tax Expense | 0 | |
Total | 122 | 122 |
Table (2)
4.
Record the necessary the adjusting journal entries (k) to (p).
Explanation of Solution
Record the necessary the adjusting journal entries (k) to (p) as follows:
Date | Account Title and Explanation | Debit ($) | Credit ($) | ||
k. | Amortization Expense (+E, -SE) | 3 | |||
Accumulated Amortization (+xA, -A) | 3 | ||||
(To record adjusting entry for amortization expenses) | |||||
l. | Supplies expense (+E, -SE) (refer working note 1) | 8 | |||
Supplies(-A) | 8 | ||||
(To record the use of supplies) | |||||
m. | Depreciation expense (+E, -SE) | 2 | |||
Accumulated depreciation –Equipment (+xA, -A) | 2 | ||||
(To record adjusting entry for depreciation expense) | |||||
n. | Interest expense (+E, -SE) | 1 | |||
Interest payable(+L) | 1 | ||||
(To record the adjusting entry for interest expense) | |||||
o. | Salaries and wages expense (+E, -SE) | 3 | |||
Salaries and wages payable (+L) | 3 | ||||
(To record the adjusting entry for salaries and wages expenses) | |||||
p. | Income tax expense(+E, -SE) | 4 | |||
Income tax payable(+L) | 4 | ||||
(To record the adjusting entry for income tax expense) |
Table (3)
Working note 1:
Calculate the value of supplies expenses:
5.
Prepare an adjusted trial balance from requirement 4.
Explanation of Solution
Prepare an adjusted trial balance for Incorporation L&S for December 31, 2018 as follows:
Incorporation L&S | ||
Adjusted Trial Balance | ||
At December 31, 2018 | ||
(in thousands) | ||
Account Titles | Debit ($) | Credit ($) |
Cash | 31 | |
Accounts Receivable | 5 | |
Supplies | 4 | |
Equipment | 27 | |
Accumulated Depreciation–Equipment | 2 | |
Software | 12 | |
Accumulated Amortization | 6 | |
Accounts Payable | 6 | |
Notes Payable (short–term) | 21 | |
Salaries and Wages Payable | 3 | |
Interest Payable | 1 | |
Income Tax Payable | 4 | |
Deferred revenue | 3 | |
Common Stock | 20 | |
Retained Earnings | 4 | |
Service Revenue | 65 | |
Supplies Expense | 8 | |
Salaries and Wages Expense | 38 | |
Depreciation Expense | 2 | |
Amortization Expense | 3 | |
Interest Expense | 1 | |
Income Tax Expense | 4 | |
Total | 135 | 135 |
Table (4)
6.
Prepare an income statement, Statement of retained earnings and balance sheet.
Explanation of Solution
Prepare an income statement for the year ended December 31, 2018 as follows:
Incorporation L&S | ||
Income Statement | ||
For the year ended December 31, 2018 | ||
(in thousands) | ||
Particulars | Amount ($) | Amount ($) |
Revenues: | ||
Service revenue | 65 | |
Total revenues | 65 | |
Less: Expenses | ||
Salaries and wage expense | 38 | |
Supplies expense | 8 | |
Amortization expense | 3 | |
Depreciation expense | 2 | |
Interest expense | 1 | |
Income tax expense | 4 | |
Total expenses | 56 | |
Net income | 9 |
Table (5)
Prepare a statement of retained earnings as follows:
Incorporation L&S | ||
Statement of Retained Earnings | ||
For the year ended December 31, 2018 | ||
(in thousands) | ||
Particulars | Amount ($) | Amount ($) |
Balance, January 1, 2018 | 4 | |
Add: Net income | 9 | |
13 | ||
Less: Dividends | (0) | |
Balance, December 31, 2018 | 13 |
Table (6)
Prepare a balance sheet for the year December 31, 2018 as follows:
Table (7)
7.
Prepare the closing entry for Incorporation L&S on December 31, 2018.
Explanation of Solution
Prepare closing entries for Incorporation L&S on December 31, 2018 as follows:
Date | Account Title and Explanation | Debit ($) | Credit ($) |
December 31, 2018 | Sales revenue(-R) | 65 | |
Salaries and wages expense(-E) | 38 | ||
Depreciation expense(-E) | 2 | ||
Supplies expense(-E) | 8 | ||
Amortization expense (-E) | 3 | ||
Income tax expense(-E) | 4 | ||
Interest expense (-E) | 1 | ||
Retained earnings(+SE) | 9 | ||
(To record the closing entries for Incorporation L&S) |
Table (8)
For closing of temporary accounts, the balances of revenues, expenses, and dividend accounts are transferred to retained earnings in order to bring zero balance for expenses and revenues accounts.
8.
Prepare a post-closing trial balance from the requirement 7.
Explanation of Solution
Prepare a Post-closing trial balance for Incorporation L&S for December 31, 2018 as follows:
Incorporation L&S | ||
Post-closing Trial Balance | ||
At December 31, 2018 | ||
(in thousands) | ||
Account Titles | Debit ($) | Credit ($) |
Cash | 31 | |
Accounts Receivable | 5 | |
Supplies | 4 | |
Equipment | 27 | |
Accumulated Depreciation–Equipment | 2 | |
Software | 12 | |
Accumulated Amortization | 6 | |
Accounts Payable | 6 | |
Notes Payable (short–term) | 21 | |
Salaries and Wages Payable | 3 | |
Interest Payable | 1 | |
Income Taxes Payable | 4 | |
Deferred revenue | 3 | |
Common Stock | 20 | |
Retained Earnings | 13 | |
Service Revenue | 0 | |
Salaries and Wages Expense | 0 | |
Supplies Expense | 0 | |
Depreciation Expense | 0 | |
Amortization expense | 0 | |
Interest Expense | 0 | |
Income Tax Expense | 0 | |
Total | 79 | 79 |
Table (9)
9.
Ascertain the net income of Incorporation L&S that has been generated during 2018 and explain whether the company has been financed primarily by liabilities or stockholders’ equity.
Explanation of Solution
The net income of Incorporation L&S for 2018:
Incorporation L&S generated net income of $9(thousand) in the year 2018 (refer table 5).
Whether the Incorporation L&S is financed primarily by liabilities or stockholders’ equity:
The invested amount of assets primarily comes from liabilities of Incorporation L&S, because the liabilities have financed $38 thousand of the Incorporation L&S’s total assets, whereas stockholder’s equity has financed $33 thousand.
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Chapter 4 Solutions
Fundamentals Of Financial Accounting
- The transactions completed by PS Music during June 2019 were described at the end of Chapter 1. The following transactions were completed during July, the second month of the businesss operations: July 1.Peyton Smith made an additional investment in PS Music by depositing 5,000 in PS Musics checking account. 1.Instead of continuing to share office space with a local real estate agency, Peyton decided to rent office space near a local music store. Paid rent for July, 1,750. 1.Paid a premium of 2,700 for a comprehensive insurance policy covering liability, theft, and fire. The policy covers a one-year period. 2.Received 1,000 cash from customers on account. 3.On behalf of PS Music, Peyton signed a contract with a local radio station, KXMD, to provide guest spots for the next three months. The contract requires PS Music to provide a guest disc jockey for 80 hours per month for a monthly fee of 3,600. Any additional hours beyond 80 will be billed to KXMD at 40 per hour. In accordance with the contract, Peyton received 7,200 from KXMD as an advance payment for the first two months. 3.Paid 250 to creditors on account. 4.Paid an attorney 900 for reviewing the July 3 contract with KXMD. (Record as Miscellaneous Expense.) 5.Purchased office equipment on account from Office Mart, 7,500. 8.Paid for a newspaper advertisement, 200. 11.Received 1,000 for serving as a disc jockey for a party. 13.Paid 700 to a local audio electronics store for rental of digital recording equipment. 14.Paid wages of 1,200 to receptionist and part-time assistant. Enter the following transactions on Page 2 of the two-column journal: 16.Received 2,000 for serving as a disc jockey for a wedding reception. 18.Purchased supplies on account, 850. July 21. Paid 620 to Upload Music for use of its current music demos in making various music sets. 22.Paid 800 to a local radio station to advertise the services of PS Music twice daily for the remainder of July. 23.Served as disc jockey for a party for 2,500. Received 750, with the remainder due August 4, 2019. 27.Paid electric bill, 915. 28.Paid wages of 1,200 to receptionist and part-time assistant. 29.Paid miscellaneous expenses, 540. 30.Served as a disc jockey for a charity ball for 1,500. Received 500, with the remainder due on August 9, 2019. 31.Received 3,000 for serving as a disc jockey for a party. 31.Paid 1,400 royalties (music expense) to National Music Clearing for use of various artists music during July. 31.Withdrew 1,250 cash from PS Music for personal use. PS Musics chart of accounts and the balance of accounts as of July 1, 2019 (all normal balances), are as follows: Instructions 1. Enter the July 1, 2019, account balances in the appropriate balance column of a four-column account. Write Balance in the Item column and place a check mark () in the Posting Reference column. (Hint: Verify the equality of the debit and credit balances in the ledger before proceeding with the next instruction.) 2. Analyze and journalize each transaction in a two-column journal beginning on Page 1, omitting journal entry explanations. 3. Post the journal to the ledger, extending the account balance to the appropriate balance column after each posting. 4. Prepare an unadjusted trial balance as of July 31, 2019.arrow_forwardThe transactions completed by PS Music during June 2019 were described at the end of Chapter 1. The following transactions were completed during July, the second month of the business's operations: July 1. Peyton Smith made an additional investment in PS Music by depositing 5,000 in PS Music's checking account. 1. Instead of continuing to share office space with a local real estate agency, Peyton decided to rent office space near a local music: store. Paid rent for July, 1,750. 1. Paid a premium of 2,700 for a comprehensive insurance policy covering liability, theft, and fire. The policy covers a one-year period. 2. Received 1,000 cash from customers on account. 3. On behalf of PS Music, Peyton signed a contract with a local radio station, KXMD, to provide guest spots for the next three months. The contract requires PS Music to provide a guest disc jockey for SO hours per month for a monthly fee of 3,600. Any additional hours beyond SO will be billed to KXMD at 40 per hour. In accordance with the contract, Peyton received 7,200 from KXMD as an advance payment for the first two months. 3. Paid 250 to creditors on account. 4. Paid an attorney 900 for reviewing the July 3 contract with KXMD. (Record as Miscellaneous Expense.) 5. Purchased office equipment on account from Office Mart, 7,500. 8. Paid for a newspaper advertisement, 200. 11. Received 1,000 for serving as a disc jockey for a party. 13. Paid 700 to a local audio electronics store for rental of digital recording equipment. 11. Paid wages of 1,200 to receptionist and part-time assistant. Enter the following transactions on Page 2 of the two-column journal: 16. Received 2,000 for serving as a disc jockey for a wedding reception. 18. Purchased supplies on account, 850. July 21. Paid 620 to Upload Music for use of its current music demos in making various music sets. 22. Paid 800 to a local radio station to advertise the services of PS Music twice daily for the remainder of July. 23. Served as disc jockey for a party for 2,500. Received 750, with the remainder due August 4, 2019. 27. Paid electric bill, 915. 28. Paid wages of 1,200 to receptionist and part-time assistant. 29. Paid miscellaneous expenses, 540. 30. Served as a disc jockey for a charity ball for 1,500. Received 500, with the remainder due on August 9, 2019. 31. Received 3,000 for serving as a disc jockey for a party. 31. Paid 1,400 royalties (music expense) to National Music Clearing for use of various artists' music during July. 31. Withdrew l,250 cash from PS Music for personal use. PS Music's chart of accounts and the balance of accounts as of July 1, 2019 (all normal balances), are as follows: 11 Cash 3,920 12 Accounts receivable 1,000 14 Supplies 170 15 Prepaid insurance 17 Office Equipment 21 Accounts payable 250 23 Unearned Revenue 31 Peyton smith, Drawing 4,000 32 Fees Earned 500 41 Wages Expense 6,200 50 Office Rent Expense 400 51 Equipment Rent Expense 800 52 Utilities Expense 675 53 Supplies Expense 300 54 music Expense 1,590 55 Advertising Expense 500 56 Supplies Expense 180 59 Miscellaneous Expense 415 Instructions 1.Enter the July 1, 2019, account balances in the appropriate balance column of a four-column account. Write Balance in the Item column and place a check mark () in the Posting Reference column. (Hint: Verify the equality of the debit and credit balances in the ledger before proceeding with the next instruction.) 2.Analyze and journalize each transaction in a two-column journal beginning on Page 1, omitting journal entry explanations. 3.Post the journal to the ledger, extending the account balance to the appropriate balance column after each posting. 4.Prepare an unadjusted trial balance as of July 31, 2019.arrow_forwardEddie Edwards and Phil Bell own and operate The Second Hand Equipment Shop. The following transactions involving notes and interest were completed during the last three months or 20--: REQUIRED 1. Prepare general journal entries for the transactions. 2. Prepare necessary adjusting entries for the notes outstanding on December 31.arrow_forward
- For the past several years, Steffy Lopez has operated a part-time consulting business from his home. As of July 1, 2016, Steffy decided to move to rented quarters and to operate the business, which was to be known as Diamond Consulting, on a full-time basis. Diamond Consulting entered into the following transactions during July: Instructions 1.Journalize each transaction in a two-column journal starting on Page 1, referring to the following chart of accounts in selecting the accounts to be debited and credited. (Do not insert the account numbers in the journal at this time.) 2.Post the journal to a ledger of four-column accounts. 3.Prepare an unadjusted trial balance. 4.At the end of July, the following adjustment data were assembled. Analyze and use these data to complete parts (5) and (6). a. Insurance expired during July is 375. b. Supplies on hand on July 31 are 1,525. c. Depreciation of office equipment for July is 750. d. Accrued receptionist salary on July 31 is 175. e. Rent expired during July is 2,400. f. Unearned fees on July 31 are 2,750. 5.(Optional) Enter the unadjusted trial balance on an end-of-period spreadsheet and complete the spreadsheet. 6.Journalize and post the adjusting entries. Record the adjusting entries on Page 3 of the journal. 7.Prepare an adjusted trial balance. 8.Prepare an income statement, a statement of owners equity, and a balance sheet. 9.Prepare and post the closing entries. (Income Summary is account #33 in the chart of accounts.) Record the closing entries on Page 4 of the journal. Indicate closed accounts by inserting a line in both the Balance columns opposite the closing entry. 10.Prepare a post-closing trial balance.arrow_forwardFor the past several years, Jeff Horton has operated a part-time consulting business from his home. As of April 1, 2016, Jeff decided to move to rented quarters and to operate the business, which was to be known as Rosebud Consulting, on a full-time basis. Rosebud Consulting entered into the following transactions during April: Instructions 1.Journalize each transaction in a two-column journal starting on Page 1, referring to the following chart of accounts in selecting the accounts to be debited and credited. (Do not insert the account numbers in the journal at this time.) 2.Post the journal to a ledger of four-column accounts. 3.Prepare an unadjusted trial balance. 4.At the end of April, the following adjustment data were assembled. Analyze and use these data to complete parts (5) and (6). a. Insurance expired during April is 350. b. Supplies on hand on April 30 are 1,225. c. Depreciation of office equipment for April is 400. d. Accrued receptionist salary on April 30 is 275. e. Rent expired during April is 2,000. f. Unearned fees on April 30 are 2,350. 5.(Optional) Enter the unadjusted trial balance on an end-of-period spreadsheet and complete the spreadsheet. 6.Journalize and post the adjusting entries. Record the adjusting entries on Page 3 of the journal. 7.Prepare an adjusted trial balance. 8.Prepare an income statement, a statement of owners equity, and a balance sheet. 9.Prepare and post the closing entries. Record the closing entries on Page 4 of the journal. (Income Summary is account #33 in the chart of accounts.) Indicate closed accounts by inserting a line in both the Balance columns opposite the closing entry. 10.Prepare a post-closing trial balance.arrow_forwardOn October 1, 2019, Jay Pryor established an interior decorating business, Pioneer Designs. During the month, Jay completed the following transactions related to the business: Oct. 1. Jay transferred cash from a personal bank account to an account to be used for the business, 18,000. 4.Paid rent for period of October 4 to end of month, 3,000. 10.Purchased a used truck for 23,750, paying 3,750 cash and giving a note payable for the remainder. 13.Purchased equipment on account, 10,500. 14.Purchased supplies for cash, 2,100. 15.Paid annual premiums on property and casualty insurance, 3,600. 15.Received cash for job completed, 8,950. Enter the following transactions on Page 2 of the two-column journal: 21.Paid creditor a portion of the amount owed for equipment purchased on October 13, 2,000. 24.Recorded jobs completed on account and sent invoices to customers, 14,150. 26.Received an invoice for truck expenses, to be paid in November, 700. 27.Paid utilities expense, 2,240. 27.Paid miscellaneous expenses, 1,100. Oct. 29. Received cash from customers on account, 7,600. 30.Paid wages of employees, 4,800. 31.Withdrew cash for personal use, 3,500. Instructions 1. Journalize each transaction in a two-column journal beginning on Page 1, referring to the following chart of accounts in selecting the accounts to be debited and credited. (Do not insert the account numbers in the journal at this time.) Journal entry explanations may be omitted. 2. Post the journal to a ledger of four-column accounts, inserting appropriate posting references as each item is posted. Extend the balances to the appropriate balance columns after each transaction is posted. 3. Prepare an unadjusted trial balance for Pioneer Designs as of October 31, 2019. 4. Determine the excess of revenues over expenses for October. 5. Can you think of any reason why the amount determined in (4) might not be the net income for October?arrow_forward
- In October, A. Nguyen established an apartment rental service. The account headings are presented below. Transactions completed during the month of October follow. a. Nguyen deposited 25,000 in a bank account in the name of the business. b. Paid the rent for the month, 1,200, Ck. No. 2015 (Rent Expense). c. Bought supplies on account, 225. d. Bought a truck for 18,000, paying 1,000 in cash and placing the remainder on account. e. Bought insurance for the truck for the year, 1,400, Ck. No. 2016. f. Sold services on account, 5,000 (Service Income). g. Bought office equipment on account from Henry Office Supply, 2,300. h. Sold services for cash for the first half of the month, 6,050 (Service Income). i. Received and paid the bill for utilities, 150, Ck. No. 2017 (Utilities Expense). j. Received a bill for gas and oil for the truck, 80 (Gas and Oil Expense). k. Paid wages to the employees, 1,400, Ck. Nos. 20182020 (Wages Expense). l. Sold services for cash for the remainder of the month, 4,200 (Service Income). m. Nguyen withdrew cash for personal use, 2,000, Ck. No. 2021. Required 1. In the equation, write the owners name above the terms Capital and Drawing. 2. Record the transactions and the balance after each transaction. Identify the account affected when the transaction involves revenues or expenses. 3. Write the account totals from the left side of the equals sign and add them. Write the account totals from the right side of the equals sign and add them. If the two totals are not equal, check the addition and subtraction. If you still cannot find the error, re-analyze each transaction.arrow_forwardKelly Pitney began her consulting business, Kelly Consulting, on April 1, 2018. The accounting cycle for Kelly Consulting for April, including financial statements, was illustrated in this chapter. During May, Kelly Consulting entered into the following transactions: May 3. Received cash from clients as an advance payment for services to be provided and recorded it as unearned fees, 4,500. 5. Received cash from clients on account, 2,450. 9. Paid cash for a newspaper advertisement, 225. 13. Paid Office Station Co. for part of the debt incurred on April 5, 640. 15. Recorded services provided on account for the period May 115, 9,180. 16. Paid part-time receptionist for two weeks salary including the amount owed on April 30, 750. 17. Recorded cash from cash clients for fees earned during the period May 1-16, 8,360. Record the following transactions on Page 6 of the journal: 20. Purchased supplies on account, 735. 21. Recorded services provided on account for the period May 16-20,4,820. 25. Recorded cash from cash clients for fees earned for the period May 17- 23, 7,900. 27. Received cash from clients on account, 9,520. 28. Paid part-time receptionist for two weeks salary, 750. 30. Paid telephone bill for May, 260. 31. Paid electricity bill for May, 810. 31. Recorded cash from cash clients for fees earned for the period May 26-31, 3,300. 31. Recorded services provided on account for the remainder of May, 2,650. 31. Paid dividends, 10,500. Instructions 1. The cl1art of accounts for Kelly Consulting is shown in Exhibit 9, and the post-closing trial balance as of April 30, 2018, is shown in Exhibit 17. For each account in the post-closing trial balance, enter the balance in the appropriate Balance column of a four-column account. Date the balances May 1, 2018, and place a check mark () in the Posting Reference column. Journalize each of the May transactions in a two-column journal starting on Page 5 of the journal and using Kelly Consultings chart of accounts. (Do not insert the account numbers in the journal at this time.) 2. Post the journal to a ledger of four-column accounts. 3. Prepare an unadjusted trial balance. 4. At the end of May, the following adjustment data were assembled. Analyze and use these data to complete parts (5) and (6). (A) Insurance expired during May is 275. (B) Supplies on hand on May 31 are 715. (C) Depreciation of office equipment for May is 330. (D) Accrued receptionist salary on May 31 is 325. (E) Rent expired during May is 1,600. (F) Unearned fees on May 31 are 3,210. 5. (Optional) Enter the unadjusted trial balance on an end-of-period spreadsheet and complete the spreadsheet. 6. Journalize and post the adjusting entries. Record the adjusting entries on Page 7 of the journal. 7. Prepare an adjusted trial balance. 8. Prepare an income statement, a retained earnings statement, and a balance sheet. 9. Prepare and post the closing entries. Record the closing entries on Page 8 of d1e journal. (Income Summary is account #34 in d1e chart of accounts.) Indicate closed accounts by inserting a line in both the Balance columns opposite the closing entry. 10. Prepare a post-closing trial balance.arrow_forwardKelly Pitney began her consulting business, Kelly Consulting, on April 1, 2016. The accounting cycle for Kelly Consulting for April, including financial statements, was illustrated in this chapter. During May, Kelly Consulting entered into the following transactions: Instructions 1. The chart of accounts for Kelly Consulting is shown in Exhibit 9, and the post-closing trial balance as of April 30, 2016, is shown in Exhibit 17. For each account in the post-closing trial balance, enter the balance in the appropriate Balance column of a four-column account. Date the balances May 1, 2016, and place a check mark () in the Posting Reference column. Journalize each of the May transactions in a two column journal starting on Page 5 of the journal and using Kelly Consultings chart of accounts. (Do not insert the account numbers in the journal at this time.) 2. Post the journal to a ledger of four-column accounts. 3. Prepare an unadjusted trial balance. 4. At the end of May, the following adjustment data were assembled. Analyze and use these data to complete parts (5) and (6) a. Insurance expired during May is 275. b. Supplies on hand on May 31 are 715. c. Depreciation of office equipment for May is 330. d. Accrued receptionist salary on May 31 is 325. e. Rent expired during May is 1,600. f. Unearned fees on May 31 are 3,210. 5.(Optional) Enter the unadjusted trial balance on an end-of-period spreadsheet and complete the spreadsheet. 6.Journalize and post the adjusting entries. Record the adjusting entries on Page 7 of the journal. 7.Prepare an adjusted trial balance. 8.Prepare an income statement, a statement of owners equity, and a balance sheet. 9.Prepare and post the closing entries. Record the closing entries on Page 8 of the journal. (Income Summary is account #33 in the chart of accounts.) Indicate closed accounts by inserting a line in both the Balance columns opposite the closing entry. 10.Prepare a post-closing trial balance.arrow_forward
- In October, A. Nguyen established an apartment rental service. The account headings are presented below. Transactions completed during the month of October follow. a. Nguyen deposited 25,000 in a bank account in the name of the business. b. Paid the rent for the month, 1,200, Ck. No. 2015. c. Bought supplies on account, 225. d. Bought a truck for 18,000, paying 1,000 in cash and placing the remainder on account e. Bought Insurance for the truck for the yean 1,400, Ck. No. 2016. f. Sold services on account 5,000. g. Bought office equipment on account from Henry Office Supply, 2,300. h. Sold services for cash for the first half of the month, 6,050. i. Received and paid the bill for utilities, 150, Ck. No. 2017. j. Received a bill for gas and oil for the truck. 80. k. Paid wages to the employees, 1,400, Ck Nos. 20182020. l. Sold services for cash for the remainder of the month, 4,200. m. Nguyen withdrew cash for personal use, 2,000, Ck. No. 2021. Required 1. Record the transactions and the balance after each transaction. 2. Total the left side of the accounting equation (left side of the equal sign), then total the right side of the accounting equation (right side of the equal sign). If the two totals are not equal, check the addition and subtraction. If you still cannot find the error, reanalyze each transaction.arrow_forwardElite Realty acts as an agent in buying, selling, renting, and managing real estate. The unadjusted trial balance on March 31, 2016, follows: The following business transactions were completed by Elite Realty during April 2016: Instructions 1. Record the April 1, 2016, balance of each account in the appropriate balance column of a four-column account, write Balance in the item section, and place a check mark () in the Posting Reference column. 2. Journalize the transactions for April in a two-column journal beginning on Page 18. Journal entry explanations may be omitted. 3. Post to the ledger, extending the account balance to the appropriate balance column after each posting. 4. Prepare an unadjusted trial balance of the ledger as of April 30, 2016. 5. Assume that the April 30 transaction for salaries and commissions should have been 19,100. (a) Why did the unadjusted trial balance in (4) balance? (b) Journalize the correcting entry. (c) Is this error a transposition or slide?arrow_forwardThe transactions completed by PS Music during June 2018 were described at the end of Chapter 1. The following transactions were completed during July, the second month of the businesss operations: July 1. Peyton Smith made an additional investment in PS Musk in exchange for common stock by depositing 5,000 in PS Music s checking account. 1. Instead of continuing to share office space with a local real estate agency, Peyton decided to rent office space near a local music store. Paid rent for July, 1,750. 1. Paid a premium of 2,700 for a comprehensive insurance policy covering liability, theft, and fire. The policy covers a one-year period. 2. Received 1,000 on account. 3. On behalf of PS Music, Peyton signed a contract with a local radio station, KXMD, to provide guest spots for the next three months. The contract requires PS Music to provide a guest disc jockey for 80 hours per month for a monthly fee of 3,600. Any additional hours beyond 80 will be billed to KXMD at 40 per hour. In accordance with the contract, Peyton received 7,200 from KXMD as an advance payment for the first two months. 3. Paid 250 on account. 4. Paid an attorney 900 for reviewing the July 3 contract with KXMD. (Record as Miscellaneous Expense.) 5. Purchased office equipment on account from Office Mart, 7,500. 8. Paid for a newspaper advertisement, 200. 11. Received 1,000 for serving as a disc jockey for a party. 13. Paid 700 to a local audio electronics store for rental of digital recording equipment. 14. Paid wages of 1,200 to receptionist and part-time assistant. Enter the following transactions on lage 2 of the two-column journal: 16. Received 2,000 for serving as a disc jockey for a wedding reception. 18. Purchased supplies on account, 850. 21. Paid 620 to Upload Music for use of its current music demos in making various music sets. 22. Paid 800 to a local radio station to advertise the services of PS Music twice daily for the remainder of July. 23. Served as disc jockey for a party for 2,500. Received 750, with the remainder due August 4, 2018. 27. Paid electric bill, 915. 28. Paid wages of 1,200 to receptionist and part-time assistant. 29. Paid miscellaneous expenses, 540. 30. Served as a disc jockey for a charity ball for 1,500. Received 500, with the remainder due on August 9, 2018. 31. Received 3,000 for serving as a disc jockey for a party. July 31. Paid 1,400 royalties (music expense) to National Music Clearing for use of various artists music during July. 31. Paid dividends, 1,250. PS Musics chart of accounts and the balance of accounts as of July 1, 2018 (all normal balances), are as follows: 11 Cash 3,920 41 Fees Earned 6,200 12 Accounts Receivable 1,000 50 Wages Expense 400 14 Supplies 170 51 Office Rent Expense 800 15 Prepaid Insurance 52 Equipment Rent Expense 675 17 Office Equipment 53 Utilities Expense 300 21 Accounts Payable 250 54 Music Expense 1,590 23 Unearned Revenue 55 Advertising Expense 500 31 Common Stock 4,000 56 Supplies Expense 180 33 Dividends 500 59 Miscellaneous Expense 415 Instructions 1. Enter the July 1, 2018, account balances in the appropriate balance column of a four-column account. Write Balance in the Item column, and place a check mark () in the Posting Reference column. {Hint: Verify the equality of the debit and credit balances in the ledger before proceeding with the next instruction.) 2. Analyze and journalize each transaction in a two-column journal beginning on Page 1, omitting journal entry explanations. 3. Post the journal to the ledger, extending the account balance to the appropriate balance column after each posting. 4. Prepare an unadjusted trial balance as of July 31, 2018.arrow_forward
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