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Chapter 2: 4RQ (page 90)
Accounting uses a double-entry system. Explain what this sentence means
Accounting is the process of recording and reporting business transactions and the sentence means every transaction is recorded by following double-entry book-keeping.
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Question: Journalizing transactions, posting journal entries to T-accounts, and preparing a trial balance
Vince York practices medicine under the business title Vince York, M.D. During July, the medical practice completed the following transactions:
Jul. 1 York contributed \(63,000 cash to the business in exchange for common stock.
5 Paid monthly rent on medical equipment, \)510.
9 Paid \(23,000 cash to purchase land to be used in operations.
10 Purchased office supplies on account, \)1,600.
19 Borrowed \(22,000 from the bank for business use.
22 Paid \)1,100 on account.
28 The business received a bill for advertising in the daily newspaper to be paid in August, \(240.
31 Revenues earned during the month included \)6,400 cash and \(6,000 on account.
31 Paid employees鈥� salaries \)2,200, office rent \(1,900, and utilities \)560. Record as a compound entry.
31 The business received \(1,120 for medical screening services to be performed next month.
31 Paid cash dividends of \)7,200.
The business uses the following accounts: Cash; Accounts Receivable; Office Supplies; Land; Accounts Payable; Advertising Payable; Unearned Revenue; Notes Payable; Common Stock; Dividends; Service Revenue; Salaries Expense; Rent Expense; Utilities Expense; and Advertising Expense.
Requirements 2. Post the journal entries to the T-accounts, using transaction dates as posting references in the ledger accounts. Label the balance of each account Bal.
Journalizing transactions, posting journal entries to four-column accounts, and preparing a trial balance
Terrence Murphy opened a law office on January 1, 2018. During the first month of operations, the business completed the following transactions:
Jan. 1 Murphy contributed \(78,000 cash to the business, Terrence Murphy, Attorney. The business issued common stock to Murphy.
3 Purchased office supplies, \)600, and furniture, \(1,700, on account.
4 Performed legal services for a client and received \)1,000 cash.
7 Purchased a building with a market value of \(130,000, and land with a market value of \)25,000. The business paid \(25,000 cash and signed a note payable to the bank for the remaining amount.
11 Prepared legal documents for a client on account, \)400.
15 Paid assistant鈥檚 semimonthly salary, \(1,120.
16 Paid for the office supplies purchased on January 3 on account.
18 Received \)2,700 cash for helping a client sell real estate.
19 Defended a client in court and billed the client for \(1,800.
25 Received a bill for utilities, \)600. The bill will be paid next month.
29 Received cash on account, \(1,500.
30 Paid \)1,200 cash for a 12-month insurance policy starting on February 1.
30 Paid assistant鈥檚 semimonthly salary, \(1,120.
31 Paid monthly rent expense, \)1,800.
31 Paid cash dividends of $2,200.
Requirements
2. Open the following four-column accounts including account numbers: Cash, 101; Accounts Receivable, 111; Office Supplies, 121; Prepaid Insurance, 131; Land, 141; Building, 151; Furniture, 161; Accounts Payable, 201; Utilities Payable, 211; Notes Payable, 221; Common Stock, 301; Dividends, 311; Service Revenue, 411; Salaries Expense, 511; Rent Expense, 521; and Utilities Expense, 531.
Question:The following transactions occurred for Lawrence Engineering:
Jul. 2 Received \(14,000 contribution from Brett Lawrence in exchange for common stock.
4 Paid utilities expense of \)370.
5 Purchased equipment on account, \(1,600.
10 Performed services for a client on account, \)2,900.
12 Borrowed \(7,100 cash, signing a notes payable.
19 Cash dividends of \)200 were paid to stockholders.
21 Purchased office supplies for $840 and paid cash.
27 Paid the liability from July 5.
Requirements 1. Open the following T-accounts for Lawrence Engineering: Cash; Accounts Receivable; Office Supplies; Equipment; Accounts Payable; Notes Payable; Common Stock; Dividends; Service Revenue; and Utilities Expense.
Identify the three categories of the accounting equation, and list at least four accounts associated with each category.
Question:Courtney Meehan has trouble keeping her debits and credits equal. During a recent month, Courtney made the following accounting errors:
a. In preparing the trial balance, Courtney omitted a \(5,000 Notes Payable. The debit to Cash was correct.
b. Courtney posted a \)1,000 Utilities Expense as \(100. The credit to Cash was correct.
c. In recording a \)600 payment on account, Courtney debited Furniture instead of Accounts Payable.
d. In journalizing a receipt of cash for service revenue, Courtney debited Cash for \(50 instead of the correct amount of \)500. The credit was correct.
e. Courtney recorded a \(210 purchase of office supplies on account by debiting Office Supplies for \)120 and crediting Accounts Payable for $120.
Requirements 1. For each of these errors, state whether total debits equal total credits on the trial balance.
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