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Chapter 3: Question 1BE (page 128)

BE3-1 (L02) Transactions for Mehta Company for the month of May are presented below. Prepare journal entries for each of these transactions. (You may omit explanations.) May 1 B.D. Mehta invests \(4,000 cash in exchange for common stock in a small welding corporation. 3 Buys equipment on account for \)1,100. 13 Pays \(400 to landlord for May rent. 21 Bills Noble Corp. \)500 for welding work done

Short Answer

Expert verified

The total balance of the debit and credit side is $6,000.

Step by step solution

01

Financial Transaction

A transaction that has some monetary value is known as a financial transaction. These transactions are responsible for changing the value of assets and liabilities of the business entity.

02

Journal Entries

Date

Accounts and Explanation

Debit $

Credit$

May 1

Cash

$4,000

Common stock

$4,000

May 3

Equipment

$1,100

Accounts payable

$1,100

May 13

Rent expenses

$400

Cash

$400

May 21

Accounts receivable

$500

Service revenue

$500

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Most popular questions from this chapter

The following are the trial balance and the other information related to Yorkis Perez, a consulting engineer.

YORKIS PEREZ, CONSULTING ENGINEER .
TRIAL BALANCE
DECEMBER 31, 2017

Debit

Credit

Cash

\( 29,500

Accounts Receivable

49,600

Allowance for Doubtful Accounts

\) 750

Supplies

1,960

Prepaid Insurance

1,100

Equipment

25,000

Accumulated Depreciation鈥擡quipment

6,250

Notes Payable

7,200

Owner鈥檚 Capital

35,010

Service Revenue

100,000

Rent Expense

9,750

Salaries and Wages Expense

30,500

Utilities Expenses

1,080

Office Expense

720

\(149,210

\)149,210

  1. Fees received in advance from clients \(6,000, which were recorded as revenue.
  2. Services performed for clients that were not recorded by December 31, \)4,900.
  3. Bad debt expense for the year is \(1,430.
  4. Insurance expired during the year \)480.
  5. Equipment is being depreciated at 10% per year.
  6. Yorkis Perez gave the bank a 90-day, 10% note for \(7,200 on December 1, 2017.
  7. Rent of the building is \)750 per month. The rent for 2017 has been paid, as has that for January 2018, and recorded as Rent Expense.
  8. Office salaries and wages earned but unpaid December 31, 2017, \(2,510.

Instructions

  1. From the trial balance and other information given, prepare annual adjusting entries as of December 31, 2017. (Omit explanations.)
  2. Prepare an income statement for 2017, a statement of owner鈥檚 equity, and a classified balance sheet. Yorkis Perez withdrew \)17,000 cash for personal use during the year.

E3-1 (L02) (Transaction Analysis鈥擲ervice Company) Beverly Crusher is a licensed CPA. During the first month of operations of her business (a sole proprietorship), the following events and transactions occurred.April 2 Invested \(32,000 cash and equipment valued at \)14,000 in the business.2 Hired an administrative assistant at a salary of \(290 per week payable monthly.3 Purchased supplies on account \)700. (Debit an asset account.)7 Paid office rent of \(600 for the month.11 Completed a tax assignment and billed client \)1,100 for services rendered. (Use Service Revenue account.)12 Received \(3,200 advance on a management consulting engagement.17 Received cash of \)2,300 for services completed for Ferengi Co.21 Paid insurance expense \(110.30 Paid administrative assistant \)1,160 for the month.30 A count of supplies indicated that \(120 of supplies had been used.30 Purchased a new computer for \)6,100 with personal funds. (The computer will be used exclusively for business purposes.)InstructionsJournalize the transactions in the general journal. (Omit explanations.)

Agazzi Repair Shop had the following transactions during the first month of business as a proprietorship. Journalize the transactions. (Omit explanations.) Aug. 2 Invested \(12,000 cash and \)2,500 of equipment in the business. 7 Purchased supplies on account for \(500. (Debit asset account.) 12 Performed services for clients, for which \)1,300 was collected in cash and \(670 was billed to the clients. 15 Paid August rent \)600. 19 Counted supplies and determined that only $270 of the supplies purchased on August 7 are still on hand.

BE3-4 (L02,3) Using the data in BE3-3, journalize the entry on July 1 and the adjusting entry on December 31 for Zubin Insurance Co. Zubin uses the accounts Unearned Service Revenue and Service Revenue.

What are closing entries and why are they necessary?
See all solutions

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