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Chapter 2: Q3SE (page 91)

Identifying normal balances For each account, identify whether the normal balance is a debit (DR) or credit (CR). a. Notes Payable b. Dividends c. Service Revenue d. Land e. Unearned Revenue f. Common Stock g. Utilities Expense h. Office Supplies i. Advertising Expense j. Interest Payable

Short Answer

Expert verified

Identification of normal balances

Accounts

Normal balance is debit (DR) or credit (CR)

a. Notes Payable

Credit (CR)

b. Dividends

Debit (DR)

c. Service Revenue

Credit (CR)

d. Land

Debit (DR)

e. Unearned Revenue

Credit (CR)

f. Common Stock

Credit (CR)

g. Utilities Expense

Debit (DR)

h. Office Supplies

Debit (DR)

i. Advertising Expense

Debit (DR)

j. Interest Payable

Credit (CR)


Step by step solution

01

Definition of Dividends

The dividends are defined as the part of the profit which is being distributed to the owners or shareholders of the business.

02

Step 2: Identification of normal balances for the account as a debit or credit

An asset, expenses have a debit balance and liabilities, capital, and revenues have a credit balance.

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Most popular questions from this chapter

In 35 words or fewer, explain the difference between a debit and a credit, and explain what the normal balance of the six account types is.

Better Days Ahead, a charitable organization, has a standing agreement with First National Bank. The agreement allows Better Days Ahead to overdraw its cash balance at the bank when donations are running low. In the past, Better Days Ahead managed funds wisely and rarely used this privilege. Jacob Henson has recently become the president of Better Days Ahead. To expand operations, Henson acquired office equipment and spent large amounts on fundraising. During Henson鈥檚 presidency, Better Days Ahead has maintained a negative bank balance of approximately $10,000.

What is the ethical issue in this situation, if any?

State why you approve or disapprove of Henson鈥檚 management of Better Days Ahead鈥檚 funds.

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鈥檚 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鈥檚 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.

Your friend, Dean McChesney, requested that you advise him on the effects that certain transactions will have on his business, A-Plus Travel Planners. Time is short, so you cannot journalize the transactions. Instead, you must analyze the transactions without a journal. McChesney will continue the business only if he can expect to earn a monthly net income of \(6,000. The business completed the following transactions during June:

a. McChesney deposited \)10,000 cash in a business bank account to start the company. The company issued common stock to McChesney.

b. Paid \(300 cash for office supplies.

c. Incurred advertising expense on account, \)700.

d. Paid the following cash expenses: administrative assistant鈥檚 salary, \(1,400; office rent, \)1,000.

e. Earned service revenue on account, \(8,800.

f. Collected cash from customers on account, \)1,200.

Requirements

2. Post the transactions directly to the accounts without using a journal. Record each transaction by letter. Calculate account balances.

What does a ledger show? What鈥檚 the difference between a ledger and a chart of accounts?
See all solutions

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