Explanation Journal: Journal is the method of recording monetary business transactions in chronological order. It records the debit and credit aspects of each transaction to abide by the double-entry system. Rules of Debit and Credit: Following rules are followed for debiting and crediting different accounts while they occur in business transactions: Debit , all increase in assets, expenses and dividends, all decrease in liabilities, revenues and stockholders’ equities. Credit , all increase in liabilities, revenues, and stockholders’ equities, all decrease in assets, expenses. Journal entries of Company B are as follows: a. Declared cash dividends: Date Accounts title and explanation Ref. Debit ($) Credit ($) Retained earnings (-SE) 1,508 Dividends payable (+L) 1,508 (To record dividends declared to the investors) Table (1) Retained earnings are a component of stockholder’s equity and it decreased the value of stockholder’s equity by $1,508. Hence, debit retained earnings for $1,508. Dividends payable is a liability account and it increased the value of liability by $1,508. Hence, credit the dividends payable for $1,508. b. Ordered equipment: Journal entry is not required, because it is not a business transaction. c. Divided paid to stockholders: Date Accounts title and explanation Ref. Debit ($) Credit ($) Dividends payable (+L) 852 Cash (+A) 852 (To record dividends paid to investors) Table (2) Dividends payable is a liability account and it decreased the value of liability by $852. Hence, debit the dividends payable for $852. Cash is an assets account and it decreased the value of asset by $852. Hence, credit the cash account for $852. d. Cash borrowed from bank Date Accounts title and explanation Ref. Debit ($) Credit ($) Cash (+A) 5,899 Notes payable (+L) 5,899 (To record cash borrowed from bank) Table (3) Cash is an assets account and it increased the value of asset by $5,899...

9th Edition

ISBN: 9781259738692

Author: Libby

Publisher: MCG

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Chapter 2, Problem 2.14E

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Record the journal entries of Company B.

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Chapter 2 Solutions

Financial Accounting

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Record the journal entries of Company B.

Solution Summary: The author explains the rules of debiting and crediting different accounts while they occur in business transactions to abide by the double-entry system.

Record the journal entries of Company B.

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Chapter 2 Solutions