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Chapter 2: Q15E (page 94)

Analyzing and journalizing transactions

As the manager of Margarita Mexican Restaurant, you must deal with a variety of business transactions. Provide an explanation for the following transactions:

a. Debit Equipment and credit Cash.

b. Debit Dividends and credit Cash.

c. Debit Wages Payable and credit Cash.

d. Debit Equipment and credit Common Stock.

e. Debit Cash and credit Unearned Revenue.

f. Debit Advertising Expense and credit Cash.

g. Debit Cash and credit Service Revenue

Short Answer

Expert verified

If an asset, expenses are increased, and equity, liability and revenue are decreased, then the account is debited and vice-versa. A detailed explanation of the answer is given in step 2.

Step by step solution

01

Definition of Service Revenue

Service revenues are defined as the amount earned by a business in exchange for services.

02

Explanations of transactions

Transactions

Explanation

a.

Purchase of equipment using cash

b.

Cash dividends are paid

c.

Wages payable (liabilities) are paid in cash

d.

Common stock issued in exchange for equipment

e.

Cash received for the services not yet provided

f.

Advertising expense incurred and paid in cash

g.

Service revenue is received in cash

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Most popular questions from this chapter

Identifying increases and decreases in accounts and normal balances Insert the missing information into the accounting equation. Signify increases as Incr. and decreases as Decr.

(a) ASSETS Retained Earnings Common Stock (d) Revenues Expenses Contributed Capital (g) (p) (h) Credit (k) Debit (l) Credit (i) (q) (j) Credit Incr. (r) (m) Credit Decr. (o) (f) Credit (c) LIABILITIES (b)

What is the difference between the trial balance and the balance sheet?

Calculating the balance of a T-account

Accounts Payable

May 2 6,000 21,000 May 1

May 22 11,500 500 May 5

8,500 May 15

500 May 23

Calculate the Accounts Payable balance.

When are credits increases? When are credits decreases?

Journalizing transactions, posting journal entries to four-column accounts, and preparing a trial balance

Theodore McMahon opened a law office on April 1, 2018. During the first month of operations, the business completed the following transactions:

Apr. 1 McMahon contributed \(70,000 cash to the business, Theodore McMahon, Attorney. The business issued common stock to McMahon.

3 Purchased office supplies, \)1,100, and furniture, \(1,300, on account.

4 Performed legal services for a client and received \)2,000 cash.

7 Purchased a building with a market value of \(150,000, and land with a market value of \)30,000. The business paid \(40,000 cash and signed a note payable to the bank for the remaining amount.

11 Prepared legal documents for a client on account, \)400.

15 Paid assistant’s semi monthly salary, \(1,200.

16 Paid for the office supplies purchased on April 3 on account. 18 Received \)2,700 cash for helping a client sell real estate.

19 Defended a client in court and billed the client for \(1,700.

25 Received a bill for utilities, \)650. The bill will be paid next month.

28 Received cash on account, \(1,100.

29 Paid \)3,600 cash for a 12-month insurance policy starting on May 1.

29 Paid assistant’s semi monthly salary, \(1,200.

30 Paid monthly rent expense, \)2,100.

30 Paid cash dividends of $3,200.

Requirements 3. Post the journal entries to four-column accounts in the ledger, using dates, account numbers, journal references, and posting references. Assume the journal entries were recorded on page 1 of the journal.
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