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Chapter 3: Question 2BE (page 128)

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.

Short Answer

Expert verified

The amount of the owner鈥檚 capital is $14,500.

Step by step solution

01

Meaning of Journal Entry

The record of business transactions in chronological order with equal amounts of debits and credits is called a journal entry. Simply we can say the recording of business transactions in the accounting record of a business.

02

Journal Entries for the above transactions are as follows:

Journal Entries

Date

Accounts Titles and Explanations

Debit

Credit

Aug 2

Cash

$12 000

Equipment

$2,500

Owner鈥檚 Capital

$14,500

Aug 7

Supplies

$500

Accounts Payable

$500

Aug 12

Cash

$1,300

Accounts receivable

$670

Service Revenue

$1,970

Aug 15

Rent Expenses

$600

Cash

$600

Aug 19

Supplies expenses

$230

Supplies

$230

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Most popular questions from this chapter

Indicate whether each of the following items is a real or nominal account and whether it appears in the balance sheet or the income statement.

(a) Prepaid Rent.

(b) Salaries and Wages Payable.

(c) Inventory.

(d) Accumulated Depreciation鈥擡quipment.

(e) Equipment.

(f) Service Revenue.

(g) Salaries and Wages Expense.

(h) Supplies.

Rolling Hills Golf Inc. was organized on July 1, 2017. Quarterly financial statements are prepared. The unadjusted trial balance and adjusted trial balance on September 30 are shown below.

ROLLING HILLS GOLF INC.TRIAL BALANCESEPTEMBER 30, 2017


Unadjusted
Adjusted

Dr.

Cr.

Dr.

Cr.

Cash

\( 6,700

\) 6,700

Accounts Receivable

400

1,000

Prepaid Rent

1,800

900

Supplies

1,200

180

Equipment

15,000

15,000

Accumulated Depreciation鈥擡quipment

\( 350

Notes Payable

\) 5,000

5,000

Accounts Payable

1,070

1,070

Salaries and Wages Payable

600

Interest Payable

50

Unearned Rent Revenue

1,000

800

Common Stock

14,000

14,000

Retained Earnings

0

0

Dividends

600

600

Service Revenue

14,100

14,700

Rent Revenue

700

900

Salaries and Wages Expense

8,800

9,400

Salaries and Wages Expense

900

1,800

Rent Expense

350

Depreciation Expense

1,020

Supplies Expense

470

Utilities Expenses

50

Interest Expense

\(35,870

\)35,870

\(37,470

\)37,470

Instructions

  1. Journalize the adjusting entries that were made.
  2. Prepare an income statement and a retained earnings statement for the 3 months ending September 30 and a classified balance sheet at September 30.
  3. Identify which accounts should be closed on September 30.
  4. If the note bears interest at 12%, how many months has it been outstanding?

When salaries and wages expense for the year is computed, why are beginning accrued salaries and wages subtracted from, and ending accrued salaries and wages added to, salaries and wages paid during the year?

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.)

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.
See all solutions

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