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Chapter 2: Q43PS-3 (page 115)

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

Consider the following transactional data for the first month of operations for Crystal Clear Cleaning.

Nov. 1 Stockholders contributed \(15,000 and a truck, with a market value of \)3,000, to the business in exchange for common stock.

2 The business paid \(4,000 to Pleasant Properties for November through February rent. (Debit Prepaid Rent)

3 Paid \)4,800 for a business insurance policy for the term November 1, 2018 through October 31, 2019. (Debit Prepaid Insurance)

4 Purchased cleaning supplies on account, \(320.

5 Purchased on account an industrial vacuum cleaner costing \)1,500. The invoice is payable November 25.

7 Paid \(3,900 for a computer and printer.

9 Performed cleaning services on account in the amount of \)4,700.

10 Received \(200 for services rendered on November 9. 15 Paid employees, \)400.

16 Received \(15,000 for a 1-year contract beginning November

16 for cleaning services to be provided. Contract begins November 16, 2018, and ends November 15, 2019. (Credit Unearned Revenue)

17 Provided cleaning services and received \)400 cash.

18 Received a utility bill for \(175 with a due date of December 4, 2018. (Use Accounts Payable)

20 Borrowed \)36,000 from bank with interest rate of 6% per year.

21 Received \(500 on account for services performed on November 9.

25 Paid \)750 on account for vacuum cleaner purchased on November 5.

29 Paid \(200 for advertising.

30 Cash dividends of \)1,400 were paid to stockholders

3. Post the journal entries to the T-accounts, and calculate account balances

Short Answer

Expert verified

Answer

Advertising expenses are the cost of advertising and required t-accounts are prepared in step 2.

Step by step solution

01

Definition of Advertising Expense

The advertising expense is defined as the cost incurred by the business for promoting and advertising goods or services.

02

Preparing the t-accounts

CASH

Nov 1 $15,000

$4,000 Nov 2

Nov 10 $200

$4,800 Nov 3

Nov 16 $15,000

$3,900 Nov 7

Nov 17 $400

$400 Nov 15

Nov 20 $36,000

$750 Nov 25

Nov 21 $500

$200 Nov 29

$1,400 Nov 30

Bal. $51,650

Accounts Receivables

Nov 9 $4,700

$200 Nov 10

$500 Nov 21

Bal. $4,000


Cleaning Supplies

Nov 4 $320

Bal. $320

Prepaid rent

Nov 2 $4,000

Bal. $4,000

Prepaid Insurance

Nov 3 $4,800

Bal. $4,800

Equipment

Nov 5 $1,500

Nov 7 $3,900

Bal. $5,400

Truck

Nov 1 $3,000

Bal. $3,000

Accounts Payable

Nov 25 $750

$320 Nov 4

$1,500 Nov 5

$175 Nov 18

$1,245 Bal.

Unearned Revenue

$15,000 Nov 16

$15,000 Bal.

Nots Payable

$36,000 Nov 20

$36,000 Bal.

Common stock

$18,000 Nov 1

$18,000 Bal.

Dividents

Nov 30 $1,400

Bal. $1,400

Service Revenue

$4,700 Nov 9

$400 Nov 17

$5,100 Bal.

Salaries Expense

Nov 15 $400

Bal. $400

Advatising expese

Nov 29 $200

Bal. $200

Utilities Expense

Nov 18 $175

Bal $175

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Most popular questions from this chapter

Before you begin this assignment, review the Tying It All Together feature in the chapter. Part of the Fry鈥檚 Electronics, Inc.鈥檚 experience involves providing technical support to its customers. This includes in-home installations of electronics and also computer support at their retail store locations.

Requirements

  1. Suppose Fry鈥檚 Electronics, Inc. provides $10,500 of computer support at the Dallas-Fort Worth store during the month of November. How would Fry鈥檚 Electronics record this transaction? Assume all customers paid in cash. What financial statement(s) would this transaction affect?

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

  1. Record each transaction in the journal, using the following account titles: Cash; Accounts Receivable; Office Supplies; Prepaid Insurance; Land; Building; Furniture; Accounts Payable; Utilities Payable; Notes Payable; Common Stock; Dividends; Service Revenue; Salaries Expense; Rent Expense; and Utilities Expense. Explanations are not required.

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.

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

The trial balance of Shawn Merry, CPA, is dated March 31, 2018: During April, the business completed the following transactions:

Cash 11,000

Office Supplies 400

Accounts Receivable 16,500

Land 30,000

Furniture 0

Automobile 0

Accounts Payable 3,800

Unearned Revenue 0

Common Stock 52,300

Dividends 0

Rent Expense 800

Salaries Expense 5,600

Service Revenue 8,200

Total Balance \( 64,300 64,300

During April, the business completed the following transactions:

Apr. 4 Collected \)2,500 cash from a client on account.

8 Performed tax services for a client on account, \(5,400.

13 Paid \)3,000 on account.

14 Purchased furniture on account, \(3,600.

15 Merry contributed his personal automobile to the business in exchange for common stock. The automobile had a market value of \)9,500.

18 Purchased office supplies on account, \(900.

19 Received \)2,700 for tax services performed on April 8.

20 Paid cash dividends of \(6,500.

21 Received \)5,700 cash for consulting work completed.

24 Received \(2,400 cash for accounting services to be completed next month.

27 Paid office rent, \)600.

28 Paid employee salary, $1,700.

Requirements

2. Open the four-column ledger accounts listed in the trial balance, together with their balances as of March 31. Use the following account numbers: Cash, 11; Accounts Receivable, 12; Office Supplies, 13; Land, 14; Furniture, 15; Automobile, 16; Accounts Payable, 21; Unearned Revenue, 22; Common Stock, 31; Dividends, 33; Service Revenue, 41; Salaries Expense, 51; and Rent Expense, 52

Question:Roy Akins was the accounting manager at Zelco, a tire manufacturer, and he played golf with Hugh Stallings, the CEO, who was something of a celebrity in the community. The CEO stood to earn a substantial bonus if Zelco increased net income by year-end. Roy was eager to get into Hugh鈥檚 elite social circle; he boasted to Hugh that he knew some accounting tricks that could increase company income by simply revising a few journal entries for rental payments on storage units. At the end of the year, Roy changed the debits from 鈥渞ent expense鈥� to 鈥減repaid rent鈥� on several entries. Later, Hugh got his bonus, and the deviations were never discovered.

Requirements 2. Who gained and who lost as a result of these actions?
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