Chapter 2, Problem 15AP

To determine

Prepare journal entries and record the above transactions in T-accounts.

Explanation of Solution

General ledger:

General ledger is a book of original entry which records the accounting data in the accounting system of an organisation.

Journal entry:

Journal entry is a set of economic events which can be measured in monetary terms. These are recorded chronologically and systematically.

Accounting rules for Journal entries:

• To record increase balance of account: Debit assets, expenses, losses and credit liabilities, capital, revenue and gains.
• To record decrease balance of account: Credit assets, expenses, losses and debit liabilities, capital, revenue and gains.

Prepare the journal entry in the general journal on June 1:

Date	Account Title and Explanation	Debit ($)	Credit ($)
June 1	Cash (A+)	13,500
	Common Stock (E+)		13,500
	(To record the issuance of common stock)

Table (1)

Prepare the journal entry in the general journal on June 2:

Date	Account Title and Explanation	Debit ($)	Credit ($)
June 2	Office Furniture and Fixtures (A+)	9,800
	Accounts Payable (L+)		7,000
	Cash (A–)		2,800
	(To record the purchase of office furniture and fixtures)

Table (2)

Prepare the journal entry in the general journal on June 3:

Date	Account Title and Explanation	Debit ($)	Credit ($)
June 3	Tax Library (A+)	3,700
	Accounts Payable (L+)		3,700
	(To record the purchase of Tax library items)

Table (3)

Prepare the journal entry in the general journal on June 4:

Date	Account Title and Explanation	Debit ($)	Credit ($)
June 4	Office Supplies (A+)	950
	Cash (A–)		560
	(To record the purchase of office supplies on cash)

Table (4)

Prepare the journal entry in the general journal on June 5:

Date	Account Title and Explanation	Debit ($)	Credit ($)
June 5	Rent Expense (E–­)	750
	Cash (A–)		750
	(To record the payment of rent expense)

Table (5)

Prepare the journal entry in the general journal on June 6:

Date	Account Title and Explanation	Debit ($)	Credit ($)
June 6	Accounts Payable (L–)	300
	Tax Library (A–)		300
	(To record the return of Tax library items)

Table (6)

Prepare the journal entry in the general journal on June 7:

Date	Account Title and Explanation	Debit ($)	Credit ($)
June 7	Accounts Receivable (A+)	8,500
	Service Revenue (E+)		8,500
	(To record the revenues earned)

Table (7)

Prepare the journal entry in the general journal on June 8:

Date	Account Title and Explanation	Debit ($)	Credit ($)
June 8	Accounts Payable (L –)	1,700
	Cash (A–)		1,700
	(To record the payment of cash)

Table (8)

Prepare the journal entry in the general journal on June 9:

Date	Account Title and Explanation	Debit ($)	Credit ($)
June 9	Cash (A+)	5,900
	Accounts Receivable (A–)		5,900
	(To record the receipt of cash from revenues earned)

Table (9)

Prepare the journal entry in the general journal on June 10:

Date	Account Title and Explanation	Debit ($)	Credit ($)
June 10	Salaries Expense (E–)	3,100
	Cash (A–)		3,100
	(To record the payment of salary expenses)

Table (10)

Prepare the journal entry in the general journal on June 11:

Date	Account Title and Explanation	Debit ($)	Credit ($)
June 11	Advertising Expenses  (E–)	300
	Accounts Payable (L+)		300
	(To record the advertising expenses on account)

Table (11)

Prepare the journal entry in the general journal on June 12:

Date	Account Title and Explanation	Debit ($)	Credit ($)
June 12	Dividends (E­­–)	800
	Cash (A–)		800
	(To record the payment of cash dividends)

Table (12)

Prepare the journal entry in the general journal on June 13:

Date	Account Title and Explanation	Debit ($)	Credit ($)
June 13	Utilities expenses (E­­–)	160
	Cash (A–)		160
	(To record the payment of utility expenses)

Table (13)

Prepare the journal entry in the general journal on June 14:

Date	Account Title and Explanation	Debit ($)	Credit ($)
June 14	Interest Expenses (E­­–)	250
	Cash (A–)		250
	(To record the payment of interest expenses)

Table (14)

Prepare T-accounts to record the above transactions:

T-account:

T-account is the form of the ledger account, where the journal entries are posted to this account. It is referred to as the T-account, because the alignment of the components of the account resembles the capital letter ‘T’.

Figure (1)

Figure (2)

Figure (3)

b.

To determine

Prepare trial balance as of June 30.

Explanation of Solution

Trial balance:

Trial balance is the summary of accounts, and their debit and credit balances at a given time.  It is usually prepared at end of the accounting period.  Debit balances are listed in left   column and credit balances are listed in right column.  The totals of debit and credit column should be equal.  Trial balance is useful in the preparation of the financial statements.

Person M
Trial Balance
As of June 30
Accounts	Debit ($)	Credit ($)
Cash	8,890
Accounts Receivable	2,600
Tax Library	3,400
Office Supplies	950
Office Furniture and Fixtures	9,800
Accounts Payable		2,000
Notes Payable		7,000
Common Stock		13,500
Dividends	800
Professional Fees Earned		8,500
Salaries Expense	3,100
Rent Expense	750
Utilities Expenses	160
Advertising Expenses	300
Interest Expenses	250
Total	31,000	31,000

Table (15)