Chapter 2, Problem 11E

Prepare general journal entries for the following transactions of Valdez Services.

a. The company paid $2,000 cash for payment on a 6−month−old account payable for office supplies.

b. The company paid $1,200 cash for the just−completed two−week salary of the receptionist.

c. The company paid $39,000 cash for equipment purchased.

d. The company paid $800 cash in dividends to the owner (sole shareholder.)

2. Transactions a, c, and e did not result in an expense. Match each transaction (a, c, and e) with one of the following reasons for not recording an expense.

This transaction is a distribution of cash to the owner. Even though equity decreased, that decrease did not occur in the process of providing goods or services to customers.
This transaction decreased cash in settlement of a previously existing liability (equity did not change). Supplies expense is recorded when assets are used, not necessarily when cash is paid.<
This transaction involves the purchase of an asset. The form of the company’s assets changed, but total assets did not (and neither did equity).