Chapter 2, Problem 12E

Analyzing and journalizing transactions involving receipt of cash

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

1. a. Brina Valdez invested $20,000 cash in the company in exchange for common stock.
2. b. The company provided services to a client and immediately received $900 cash.
3. c. The company received $10,000 cash from a client in payment for services to be provided next year.
4. d. The company received $3,500 cash from a client in partial payment of accounts receivable.
5. e. The company borrowed $5,000 cash from the bank by signing a note payable.

2. Transactions a, c, d, and e did not yield revenue. Match each transaction (a, c, d, and e) with one of the following reasons for not recording revenue.

_______ This transaction changed the form of an asset from a receivable to cash. Total assets were not increased (revenue was recognized when the services were originally provided).

_______ This transaction brought in cash (increased assets), and it also increased a liability by the same amount (represented by the signing of a note to repay the amount).

_______ This transaction brought in cash, but this is an owner investment.

_______ This transaction brought in cash, and it created a liability to provide services to the client in the next year.