Financial Accounting
Financial Accounting
10th Edition
ISBN: 9781260481563
Author: Libby, Robert
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Chapter 9, Problem 1CON

1.

To determine

Prepare journal entries to record each of the given transactions.

1.

Expert Solution
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Explanation of Solution

Journal:

Journal is the method of recording monetary business transactions in chronological order. It records the debit and credit aspects of each transaction to abide by the double-entry system.

Accounting rules for journal entries:

  • To record increase balance of account: Debit assets, expenses, losses and credit liabilities, capital, revenue and gains.
  • To record decrease balance of account: Credit assets, expenses, losses and debit liabilities, capital, revenue and gains.

Prepare journal entry to record the purchase and payment of merchandise.

DateAccount Titles and Explanation

Debit

(Amount in $)

Credit

(Amount in $)

September

15

Purchase125,000
Cash125,000
(To record the purchase and payment of merchandise)

(Table 1)

  • Purchase is an asset and there is an increase in the value of the assets. Hence, debit the purchase by $125,000.
  • Cash is an asset and there is a decrease in the value of the asset. Hence, credit the assets by $125,000.

Prepare journal entry to record the borrowing of $900,000 from Bank S for general use; signed a 11 month, 5% annual interest-bearing note for the money.

DateAccount Titles and Explanation

Debit

(Amount in $)

Credit

(Amount in $)

October 1Cash900,000
Notes payable900,000
(To record the borrowing of money on a short-term)

(Table 2)

  • Cash is an asset and there is an increase in the value of the asset. Hence, debit the cash by $900,000.
  • Notes payable is a liability and there is an increase in the value of liability. Hence, credit the notes payable by $900,000.

Prepare journal entry to record the customer deposit from Company JL for services to be performed in the future.

DateAccount Titles and Explanation

Debit

(Amount in $)

Credit

(Amount in $)

October

5

Cash40,000
Deferred Revenue40,000
(To record the customer deposit of $40,000 for the services to be performed in future )

(Table 3)

  • Cash is an asset and there is an increase in the value of the asset. Hence, debit the cash by $40,000.
  • Deferred Revenue is a liability and there is an increase in the value of liability. Hence, credit the deferred revenue by $40,000.

Prepare journal entry to record the cash paid on the services performed by Company JP.

DateAccount Titles and Explanation

Debit

(Amount in $)

Credit

(Amount in $)

October 15Deferred Revenue18,000
Service Revenue18,000
(To record the cash paid on the service performed to Company JL)

(Table 4)

  • Deferred Revenue is a liability and there is a decrease in the value of liability. Hence, debit the deferred revenue by $18,000.
  • Sales Revenue is a component of stockholder’s equity and there is an increase in the value of equity. Hence, credit the sales revenue by $18,000.

Prepare journal entry to record the electricity bill of $12,000 that is to be paid in early of January.

DateAccount Titles and Explanation

Debit

(Amount in $)

Credit

(Amount in $)

December 12Electricity expense12,000
Electric payable12,000
(To record the electricity bill of $12,000)

(Table 5)

  • Electricity expense is a component of stockholder’s equity and there is an increase in the value of equity. Hence, debit the electricity expense by $12,000.
  • Electricity payable is a liability and there is an increase in the value of equity. Hence, credit the electricity payable by $12,000.

Prepare journal entry to record the wages earned but not yet paid on December 31.

DateAccount Titles and Explanation

Debit

(Amount in $)

Credit

(Amount in $)

December 31Wages expense52,000
Wages payable52,000
(To record the wages earned but not yet paid on December 31.)

(Table 6)

  • Wages expense is a component of stockholder’s equity and there is an increase in the value of equity. Hence, debit the wages expense by $52,000.
  • Wages payable is a liability and there is an increase in the value of equity. Hence, credit the wages payable by $52,000.

2.

To determine

Prepare adjusting entries required on December31.

2.

Expert Solution
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Explanation of Solution

Adjusting entries:

Adjusting entries refers to the entries that are made at the end of an accounting period in accordance with revenue recognition principle, and expenses recognition principle.  The purpose of adjusting entries is to adjust the revenue, and the expenses during the period in which they actually occurs.

DateAccount Titles and Explanation

Debit

(Amount in $)

Credit

(Amount in $)

December 31Interest expense11,250
Interest  payable (1)11,250
(To record the adjusting entry for interest payable on December 31.)

(Table 7)

  • Interest expense is a component of stockholder’s equity and there is an increase in the value of equity. Hence, debit the interest expense by $11,250.
  • Interest payable is a liability and there is an increase in the value of equity. Hence, credit the interest payable by $11,250.

Working Note:

Interest Payable = (Principal Amount× Annual Interest rate× Number of period)=$900,000×5%×3(October 1 to December 31)12=$11,250 (1)

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Chapter 9 Solutions

Financial Accounting

Ch. 9 - Prob. 11QCh. 9 - Prob. 12QCh. 9 - Prob. 13QCh. 9 - 14. Define annuity. Ch. 9 - Prob. 15QCh. 9 - 16. You purchased a new car and promised to pay...Ch. 9 - Prob. 1MCQCh. 9 - Prob. 2MCQCh. 9 - 3. Which of the following best describes accrued...Ch. 9 - Prob. 4MCQCh. 9 - 5. A company is facing a lawsuit from a customer....Ch. 9 - 6. Which of the following transactions would...Ch. 9 - 7. How is working capital calculated? Current...Ch. 9 - 8. The present value of an annuity of $10,000 per...Ch. 9 - Prob. 9MCQCh. 9 - Prob. 10MCQCh. 9 - Prob. 1MECh. 9 - M9-2 Computing and Interpreting Accounts Payable...Ch. 9 - Prob. 3MECh. 9 - Prob. 4MECh. 9 - Prob. 5MECh. 9 - M9-6 Computing Working Capital The balance sheet...Ch. 9 - M9-7 Analyzing the Impact of Transactions on...Ch. 9 - M9-8 Accounting for Long-Term Liabilities:...Ch. 9 - Prob. 9MECh. 9 - M9-10 Computing the Present Value of an...Ch. 9 - Computing the Present Value of a Complex...Ch. 9 - Computing Present Values and Recording Long-Term...Ch. 9 - Identifying Current Liabilities, Computing Working...Ch. 9 - Paul Company completed the salary and wage...Ch. 9 - Computing Payroll Costs; Discussion of Labor...Ch. 9 - Recording a Note Payable through Its Time to...Ch. 9 - E9-5 Determining Financial Statement Effects of...Ch. 9 - Prob. 6ECh. 9 - Calculating and Explaining the Accounts Payable...Ch. 9 - Reporting Notes Payable and Calculating Interest...Ch. 9 - Prob. 9ECh. 9 - Using Working Capital Saks Fifth Avenue’s balance...Ch. 9 - E9-11 Reporting a Long-Term Liability McDonald’s...Ch. 9 - Prob. 12ECh. 9 - Prob. 13ECh. 9 - Computing a Present Value An investment will pay...Ch. 9 - Computing a Present Value An investment will pay...Ch. 9 - Computing a Present Value Involving an Annuity and...Ch. 9 - Prob. 17ECh. 9 - Prob. 18ECh. 9 - Calculating a Retirement Fund You are a financial...Ch. 9 - Determining an Educational Fund Judge Drago has...Ch. 9 - Prob. 21ECh. 9 - Prob. 22ECh. 9 - Prob. 23ECh. 9 - Prob. 24ECh. 9 - Prob. 1PCh. 9 - Prob. 2PCh. 9 - Prob. 3PCh. 9 - During its first year of operations, Walnut...Ch. 9 - Use the data from Problem P9-4 to complete this...Ch. 9 - Prob. 6PCh. 9 - Prob. 7PCh. 9 - Prob. 8PCh. 9 - Prob. 9PCh. 9 - For each of the following transactions, determine...Ch. 9 - Prob. 11PCh. 9 - Prob. 12PCh. 9 - P9-13 (Chapter Supplement B) Recording and...Ch. 9 - Prob. 14PCh. 9 - Prob. 1APCh. 9 - Determining Financial Effects of Transactions...Ch. 9 - Prob. 3APCh. 9 - Calculating and Explaining the Accounts Payable...Ch. 9 - For each of the following transactions, determine...Ch. 9 - Prob. 6APCh. 9 - Prob. 7APCh. 9 - Prob. 8APCh. 9 - Prob. 1CONCh. 9 - Prob. 1CPCh. 9 - Prob. 2CPCh. 9 - Prob. 3CPCh. 9 - Prob. 4CPCh. 9 - Prob. 5CP
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