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Chapter 3: Q17E (page 135)

E3-17 (L02) (Transactions of a Corporation, Including Investment and Dividend) Scratch Miniature Golf and DrivingRange Inc. was opened on March 1 by Scott Verplank. The following selected events and transactions occurred during March.Mar. 1 Invested \(50,000 cash in the business in exchange for common stock.3 Purchased Michelle Wie’s Golf Land for \)38,000 cash. The price consists of land \(10,000, building \)22,000, and equipment\(6,000. (Make one compound entry.)5 Advertised the opening of the driving range and miniature golf course, paying advertising expenses of \)1,600.6 Paid cash \(1,480 for a one-year insurance policy.10 Purchased golf equipment for \)2,500 from Singh Company, payable in 30 days.18 Received golf fees of \(1,200 in cash.25 Declared and paid a \)500 cash dividend.30 Paid wages of \(900.30 Paid Singh Company in full.31 Received \)750 of fees in cash.Scratch uses the following accounts: Cash, Prepaid Insurance, Land, Buildings, Equipment, Accounts Payable, Common Stock,Dividends, Service Revenue, Advertising Expense, and Salaries and Wages Expense.InstructionsJournalize the March transactions. (Provide explanations for the journal entries.)

Short Answer

Expert verified

The journal entries for March are shown in step 2.

Step by step solution

01

Meaning of Journal Entry

The journal entries are the first step in the preparationof financial statements. A journal entry can be defined as the act of making the records of thetransactions of the business in chronological order.

02

Preparation of journal entries

Scratch Miniature Golf and Driving

Range Inc.

Journal entries

Date

Account and explanation

Debit $

Credit $

March 1

Cash

50000

Common stock

50000

( To issuance of common stock is recorded)

March 3

Land

10000

Building

22000

Equipment

6000

Cash

38000

( To the purchase of fixed assets is recorded)

March 5

Advertising expense

1600

Cash

1600

( Toadvertisementexpenses is recorded)

March 6

Prepaid insurance

1480

Cash

1480

( To prepaid insurance is recorded)

March 10

Equipment

2500

Accounts payable

2500

( To purchase of equipment is recorded)

March 18

Cash

1200

Service revenue

1200

(To service revenue is received)

March 25

Dividends

500

Cash

500

( To cash dividend paid is recorded)

March 30

Salaries and Wages expenses

900

Cash

900

( To wages paid is recorded)

March 30

Accounts payable

2500

Cash

2500

( To accounts payable toSinghh company is recorded)

March 31

Cash

750

Service revenie

750

( To service revenue is recored)

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Most popular questions from this chapter

Is it necessary that a trial balance be taken periodically? What purpose does it serve?

The following trial balance of Watteau Co. does not balance:

WATTEAU CO.

TRIAL BALANCE

JUNE 30, 2017

Debit \(

Credit \)

Cash

\(2,870

Accounts receivable

\)3,231

Supplies

800

Equipment

3,800

Account payable

2,666

Unearned service revenue

1,200

Common stock

6,000

Retained earnings

3,000

Service revenue

2,380

Salaries and wages expenses

3,400

Office expenses

940

\(13,371

\)16,916

Each of the listed accounts should have a normal balance per the general ledger. An examination of the ledger and journal reveals the following errors.

  1. Cash received from the customer on account was debited for \(570, and accounts receivable was credited for the same amount. The actual collection was for \)750.
  2. The purchase of a computer printer on account for \(500 was recorded as a debit to Supplies for \)500 and a credit to Accounts Payable for \(500.
  3. Services were performed on account for a client for \)890. Accounts receivable was debited for \(890 and service revenue was credited for \)89.
  4. A payment of \(65 for telephone charges was recorded as a debit to Office Expense for \)65 and a debit to Cash for \(65.
  5. When the unearned service revenue account was reviewed, it was found that service revenue amounting to \)325 was performed prior to June 30 (related to unearned service revenue).
  6. A debit posting to salaries and wages expenses of \(670 was omitted.
  7. A payment on account for \)206 was credited to cash for \(206 and credit to account payable for \)260.
  8. A dividend of \(575 was debited to salaries and wages expenses for \)575 and credit to cash for $575.

Instruction

Prepare a correct trial balance. (Note: It may be necessary to add one or more accounts to the trial balance.)

E3-7 (L03) (Analyze Adjusted Data) A partial adjusted trial balance of Piper Company at January 31, 2017, shows the following.

PIPER COMPANY

ADJUSTED TRIAL BALANCEJANUARY 31, 2017

Debit (\() Credit(\))Supplies \( 700Prepaid Insurance 2,400Salaries and Wages Payable \) 800UnearnedService Revenue 750Supplies Expense 950Insurance Expense 400Salaries and Wages Expense 1,800Service Revenue 2,000

InstructionsAnswer the following questions, assuming the year begins January 1.(a) If the amount in Supplies Expense is the January 31 adjusting entry, and \(850 of supplies was purchased in January,what was the balance in Supplies on January 1?(b) If the amount in Insurance Expense is the January 31 adjusting entry, and the original insurance premium was for oneyear, what was the total premium and when was the policy purchased?(c) If \)2,500 of salaries was paid in January, what was the balance in Salaries and Wages Payable at December 31, 2016?(d) If $1,600 was received in January for services performed in January, what was the balance in Unearned Service Revenueat December 31, 2016?

E3-3 (L02) (Corrected Trial Balance) The following trial balance of Blues Traveler Corporation does not balance.

BLUES TRAVELER CORPORATION

TRIAL BALANCE

APRIL 30, 2017
Debit Credit

Cash \( 5,912Accounts Receivable 5,240Supplies 2,967Equipment 6,100Accounts Payable \) 7,044Common Stock 8,000Retained Earnings 2,000Service Revenue 5,200Office Expense 4,320

Total \(24,539 \)22,244

An examination of the ledger shows these errors.1. Cash received from a customer on account was recorded (both debit and credit) as \(1,380 instead of \)1,830.2. The purchase on account of a computer costing \(3,200 was recorded as a debit to Office Expense and a credit to AccountsPayable.3. Services were performed on account for a client, \)2,250, for which Accounts Receivable was debited \(2,250 and ServiceRevenue was credited \)225.4. A payment of \(95 for telephone charges was entered as a debit to Office Expense and a debit to Cash.5. The Service Revenue account was totaled at \)5,200 instead of $5,280.InstructionsFrom this information prepare a corrected trial balance.

The accounts listed below appeared in the December 31 trial balance of the Savard Theater.

Debit

Credit

Equipment

\(192,000

Accumulated Depreciation—Equipment

\) 60,000

Notes Payable

90,000

Admissions Revenue

380,000

Advertising Expense

13,680

Salaries and Wages Expense

57,600

Interest Expense

1,400

Instructions

  1. From the account balances listed above and the information given below, prepare the annual adjusting entries necessary on December 31. (Omit explanations.)
    1. The equipment has an estimated life of 16 years and a salvage value of \(24,000 at the end of that time. (Use straightline method.)
    2. The note payable is a 90-day note given to the bank October 20 and bearing interest at 8%. (Use 360 days for denominator.)
    3. In December, 2,000 coupon admission books were sold at \)30 each and recorded as Admissions Revenue. They could be used for admission any time after January 1.
    4. Advertising expense paid in advance and included in Advertising Expense \(1,100.
    5. Salaries and wages accrued but unpaid \)4,700.
  2. What amounts should be shown for each of the following on the income statement for the year?
    1. Interest expense.
    2. Admissions revenue.
    3. Advertising expense.
    4. Salaries and wages expense.
See all solutions

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