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Chapter 2: 24E_2 (page 97)

Question:Journalizing transactions, posting journal entries to four-column accounts, and preparing a trial balance The following transactions occurred during the month for Teresa Parker, CPA:

Jun. 1 Parker opened an accounting firm by contributing \(13,200 cash and office furniture with a fair market value of \)5,300 in exchange for common stock.

5 Paid monthly rent of \(1,300.

9 Purchased office supplies on account, \)600.

14 Paid employee’s salary, \(1,900.

18 Received a bill for utilities to be paid next month, \)370.

21 Paid \(500 of the accounts payable created on June 9.

25 Performed accounting services on account, \)5,700.

28 Paid cash dividends of $6,700

Requirements 2. Journalize the transactions, and then post the journal entries to the four-column accounts. Explanations are not required for the journal entries. Keep a running balance in each account. Assume the journal entries are recorded on page 10 of the journal.

Short Answer

Expert verified

The required journal entries are passed in step 1 and four-column accounts is also prepared in step 2.

Step by step solution

01

Step-by-Step SolutionStep 1:Journal Entries

Journal entry

Date

Particulars

Debit ($)

Credit ($)

June

1

Cash

$13,200

Office Furniture

$5,300

Common Stock

$18,500

5

Rent Expense

$1,300

Cash

$1,300

9

Office Supplies

$600

Accounts Payable

$600

14

Salary Expense

$1,900

Cash

$1,900

18

Utilities Expense

$370

Utilities Payable

$370

21

Accounts Payable

$600

Cash

$600

25

Accounts Receivables

$5,700

Service Revenue

$5,700

28

Dividends

$6,700

Cash

$6,700

02

Opening of Accounts

Cash Account Number - 110

Balance

Date

Item

PR

Debit

Credit

Debit

Credit

Jun 1

Common stock

$13,200

$13,200

5

Rent Expense

$1,300

$11,900

14

Salary Expense

$1,900

$10,000

21

Accounts Payable

$500

$9,500

28

Dividends

$6,700

$2,800

Accounts Receivables Account Number - 120

Balance

Date

Item

PR

Debit

Credit

Debit

Credit

June 25

Service Revenue

$5,700

$5,700

Office Supplies Account Number - 130

Balance

Date

Item

PR

Debit

Credit

Debit

Credit

June 9

Accounts Payable

$600

$600

Office Furniture Account Number - 140

Balance

Date

Item

PR

Debit

Credit

Debit

Credit

Jun 1

Common stock

$5,300

$5,300

Accounts Payable Account Number - 210

Balance

Date

Item

PR

Debit

Credit

Debit

Credit

June 9

Office Supplies

$600

$600

June 21

Cash

$500

$100

Utilities Payable Account Number - 220

Balance

Date

Item

PR

Debit

Credit

Debit

Credit

June 18

Utility Expense

$370

$370

Common Stock Account Number - 310

Balance

Date

Item

PR

Debit

Credit

Debit

Credit

Jun 1

Cash

$13,200

$13,200

Furniture

$5,300

$5,300

Dividends Account Number - 320

Balance

Date

Item

PR

Debit

Credit

Debit

Credit

June 28

Cash

$6,700

$6,700

Service Revenue Account Number - 410

Balance

Date

Item

PR

Debit

Credit

Debit

Credit

June 25

Accounts Receivables

$5,700

$5,700

Salaries Expense Account Number - 510

Balance

Date

Item

PR

Debit

Credit

Debit

Credit

June 14

Cash

$1,900

$1,900

Rent Expense Account Number – 520

Balance

Date

Item

PR

Debit

Credit

Debit

Credit

June 5

Cash

$1,300

$1,300

Utilities Expense Account Number - 530

Balance

Date

Item

PR

Debit

Credit

Debit

Credit

June 18

Utilities Payable

$370

$370

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Most popular questions from this chapter

Question: The following transactions occurred for Wilke Technology Solutions:

May 1 The business received cash of \(105,000 and issued common stock to Zoe Wilke.

2 Purchased office supplies on account, \)550.

4 Paid \(57,000 cash for building and land. The building had a fair market value of \)45,000.

6 Performed services for customers and received cash, \(3,600.

9 Paid \)350 on accounts payable.

17 Performed services for customers on account, \(3,500.

19 Paid rent expense for the month, \)1,200.

20 Received \(1,500 from customers for services to be performed next month.

21 Paid \)900 for advertising in next month’s IT Technology magazine.

23 Received \(3,100 cash on account from a customer.

31 Incurred and paid salaries, \)1,700

Posting journal entries to four-column accounts

Requirements 1. Open four-column accounts using the following account numbers: Cash, 110; Accounts Receivable, 120; Office Supplies, 130; Prepaid Advertising, 140; Land, 150; Building, 160; Accounts Payable, 210; Unearned Revenue, 220; Common Stock, 310; Service Revenue, 410; Rent Expense, 510; and Salaries Expense, 520.

Identify which types of accounts have a normal debit balance and which types of accounts have a normal credit balance.

What is a T-account? On which side is the debit? On which side is the credit? Where does the account name go on a T-account?

Journalizing transactions, posting to T-accounts, and preparing a trial balance

Problem P2-42 continues with the company introduced in Chapter 1, Canyon Canoe Company. Here you will account for Canyon Canoe Company’s transactions as it is actually done in practice. Begin by reviewing the transactions from Chapter 1. The transactions have been reprinted below.

Nov. 1 Received \(16,000 cash to begin the company and issued common stock to Amber and Zach.

2 Signed a lease for a building and paid \)1,200 for the first month’s rent.

3 Purchased canoes for \(4,800 on account.

4 Purchased office supplies on account, \)750.

7 Earned \(1,400 cash for rental of canoes.

13 Paid \)1,500 cash for wages.

15 Paid \(50 dividends to stockholders.

16 Received a bill for \)150 for utilities. (Use separate payable account.)

20 Received a bill for \(175 for cell phone expenses. (Use separate payable account.)

22 Rented canoes to Early Start Daycare on account, \)3,000.

26 Paid \(1,000 on account related to the November 3 purchase.

28 Received \)750 from Early Start Daycare for canoe rental on November 22.

30 Paid \(100 dividends to stockholders

In addition, Canyon Canoe Company completed the following transactions for December.

Dec. 1 Amber and Zack contributed land on the river (worth \)85,000) and a small building to use as a rental office (worth \(35,000) in exchange for common stock.

1 Prepaid \)3,000 for three months’ rent on the warehouse where the company stores the canoes.

2 Purchased canoes signing a note payable for \(7,200

4 Purchased office supplies on account for \)500.

9 Received \(4,500 cash for canoe rentals to customers.

15 Rented canoes to customers for \)3,500, but will be paid next month.

16 Received a \(750 deposit from a canoe rental group that will use the canoes next month.

18 Paid the utilities and telephone bills from last month.

19 Paid various accounts payable, \)2,000.

20 Received bills for the telephone (\(325) and utilities (\)295) which will be paid later.

31 Paid wages of \(1,800. 31 Paid cash dividend to stockholders, \)300.

Requirements

1. Journalize the transactions for both November and December, using the following accounts: Cash; Accounts Receivable; Office Supplies; Prepaid Rent; Land; Building; Canoes; Accounts Payable; Utilities Payable; Telephone Payable; Unearned Revenue; Notes Payable; Common Stock; Dividends; Canoe Rental Revenue; Rent Expense; Utilities Expense; Wages Expense; and Telephone Expense. Explanations are not required. (Hint: For November transactions, refer to your answer for Chapter 1.)

2. Open a T-account for each of the accounts.

3. Post the journal entries to the T-accounts, and calculate account balances. Formal posting references are not required.

4. Prepare a trial balance as of December 31, 2018.

5. Prepare the income statement of Canyon Canoe Company for the two months ended December 31, 2018.

6. Prepare the statement of retained earnings for the two months ended December 31, 2018.

7. Prepare the balance sheet as of December 31, 2018.

8. Calculate the debt ratio for Canyon Canoe Company at December 31, 2018

Question:Preparing financial statements from the trial balance and calculating the debt ratio

Preparing financial statements from the trial balance and calculating the debt ratio

Account Title Debit Credit

Office Supplies 1,400

Cash 32,000

Accounts Receivable 9,100

Prepaid Insurance 2,600

Equipment 24,000

Accounts Payable 3,400

Unearned Revenue 1,296

Notes Payable 34,000

Common Stock 20,000

Dividends 3,000

Salaries Expense 1,600

Rent Expense 700

Utilities Expense 100

Service Revenue 15,804

Total Balance \( 74,500 \) 74,500

Requirements 4. Calculate the debt ratio as of July 31, 2018.
See all solutions

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