Chapter 2, Problem 2.3E

To determine

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’.
• The components of the T-account are as follows:

1. 1. a) The title of the account
   2. b) The left or debit side
   3. c) The right or credit side

To Post: The journal entries to the T-accounts.

Explanation of Solution

Post the journal entries to the T-accounts.

T-account of Cash Account:

Cash Account
Date	Details	Debit ($)		Date	Details	Credit ($)
March 1	Beginning balance	0			Equipment (Transaction 2)	10,000
	Common stock (Transaction 1)	300,000			Rent expense (Transaction 5)	5,000
	Accounts receivable (Transaction 8)	55,000			Prepaid insurance (Transaction 6)	6,000
					Accounts payable (Transaction 7)	70,000
	Total	355,000			Total	91,000
March 31	Ending Balance	264,000

Table (1)

Cash is an asset account, and it has a normal debit balance. Hence, debit all the journal entries which increase the cash account, and credit all the journal entries which decrease the cash account.

T-account of Accounts Receivable:

Accounts Receivable Account
Date	Details	Debit ($)		Date	Details	Credit ($)
March 1	Beginning balance	0			Cash (Transaction 8)	55,000
	Service Revenue (Transaction 4)	120,000
	Total	120,000			Total	55,000
March 31	Ending Balance	65,000

Table (2)

Accounts receivable is an asset account, and it has a normal debit balance. Hence, debit all the journal entries which increase the accounts receivable account, and credit all the journal entries which decrease the accounts receivable account.

T-account of Inventory Account:

Inventory Account
Date	Details	Debit ($)		Date	Details	Credit ($)
March 1	Beginning balance	0			Cost of goods sold (Transaction 4)	70,000
	Accounts payable (Transaction 3)	90,000
	Total	90,000			Total	70,000
March 31	Ending Balance	20,000

Table (3)

Inventory is an asset account, and it has a normal debit balance. Hence, debit all the journal entries which increase the inventory account, and credit all the journal entries which decrease the inventory account.

T-account of Prepaid Insurance Account:

Prepaid Insurance Account
Date	Details	Debit ($)		Date	Details	Credit ($)
March 1	Beginning balance	0				-
	Cash (Transaction 6)	6,000
	Total	6,000			Total	-
March 31	Ending Balance	6,000

Table (4)

Prepaid insurance is an asset account, and it has a normal debit balance. Hence, debit all the journal entries which increase the prepaid insurance account, and credit all the journal entries which decrease the prepaid insurance account.

T-account of Equipment Account:

Equipment Account
Date	Details	Debit ($)		Date	Details	Credit ($)
March 1	Beginning balance	0				-
	Cash (Transaction 2)	40,000				-
	Total	40,000			Total	-
March 31	Ending Balance	40,000

Table (5)

Equipment is an asset account, and it has a normal debit balance. Hence, debit all the journal entries which increase the equipment account, and credit all the journal entries which decrease the equipment account.

T-account of Accumulated Depreciation- Equipment account:

Accumulated Depreciation-Equipment Account
Date	Details	Debit ($)		Date	Details	Credit ($)
				March 1	Beginning balance	0
					Depreciation expense (Transaction 9)	1,000
				March 31	Ending Balance	1,000

Table (6)

Accumulated Depreciation – Equipment is a liability account, and it has a normal credit balance. Hence, debit all the journal entries which decrease the accumulated depreciation–Equipment account, and credit all the journal entries which increase the accumulated depreciation–Equipment account.

T-account of Accounts Payable:

Accounts Payable Account
Date	Details	Debit ($)		Date	Details	Credit ($)
	Cash (Transaction 7)	70,000		March 1	Beginning balance	0
					Inventory (Transaction 3)	90,000
	Total	70,000			Total	90,000
				March 31	Ending Balance	20,000

Table (7)

Accounts payable is a liability account, and it has a normal credit balance. Hence, debit all the journal entries which decrease the accounts payable account, and credit all the journal entries which increase the accounts payable account.

T-account of Notes Payable:

Notes Payable Account
Date	Details	Debit ($)		Date	Details	Credit ($)
				March 1	Beginning balance	0
					Equipment (Transaction 2)	30,000
					Total	30,000
				March 31	Ending Balance	30,000

Table (8)

Notes payable is a liability account, and it has a normal credit balance. Hence, debit all the journal entries which decrease the notes payable account, and credit all the journal entries which increase the notes payable account.

T-account of Common Stock:

Common Stock Account
Date	Details	Debit ($)		Date	Details	Credit ($)
				March 1	Beginning balance	0
					Cash (Transaction 1)	300,000
					Total	300,000
				March 31	Balance	300,000

Table (9)

Common stock is a component of owner’s equity, and it has a normal credit balance. Hence, debit all the journal entries which decrease the common stock account, and credit all the journal entries which increase the common stock account.

T-account of Sales Revenue:

Sales Revenue Account
Date	Details	Debit ($)		Date	Details	Credit ($)
				March 1	Beginning balance	0
					Accounts receivable (Transaction 4)	120,000
					Total	120,000
				March 31	Ending Balance	120,000

Table (10)

Sales Revenue is a revenue account which is a component of owner’s equity, and it has a credit balance. Hence, debit all the journal entries which decrease the sales revenue account, and owner’s equity, and credit all the journal entries which increase the sales revenue account, and owner’s equity.

T-account of Cost of Goods Sold:

Cost of Goods Sold Account
Date	Details	Debit ($)		Date	Details	Credit ($)
March 1	Beginning balance	0				-
	Inventory (Transaction 4)	70,000
	Total	70,000			Total	-
March 31	Ending Balance	70,000

Table (11)

Cost of goods sold is an expense account which is a component of owner’s equity, and it has a debit balance. Hence, debit all the journal entries which increase the cost of goods sold account, and decrease the owner’s equity account, and credit all the journal entries which decrease the cost of goods sold account, and increase the owner’s equity account.

T-account of Rent Expense:

Rent Expense Account
Date	Details	Debit ($)		Date	Details	Credit ($)
March 1	Beginning balance	0				-
	Cash(Transaction 5)	5,000
	Total	5,000			Total	-
March 31	Ending Balance	5,000

Table (12)

Rent expense is an expense account which is a component of owner’s equity, and it has a debit balance. Hence, debit all the journal entries which increase the rent expense account, and decrease the owner’s equity account, and credit all the journal entries which decrease the rent expense account, and increase the owner’s equity account.

T-account of Depreciation Expense:

Depreciation Expense Account
Date	Details	Debit ($)		Date	Details	Credit ($)
March 1	Beginning balance	0				-
	Accumulated depreciation (Transaction 9)	1,000
	Total	1,000			Total	-
March 31	Ending Balance	1,000

Table (13)

Depreciation expense is an expense account which is a component of owner’s equity, and it has a debit balance. Hence, debit all the journal entries which increase the depreciation account, and decrease the owner’s equity account, and credit all the journal entries which decrease the depreciation account, and increase the owner’s equity account.

To determine

To Prepare: A trial balance for Corporation W from the ending account balances.

Explanation of Solution

Trial Balance:

Trial Balance is prepared at the end of an accounting period listing all the ledgers and their balances. The total of the debit balances in the trial balance shall match the total of the credit balances. It is prepared to check whether there is any mathematical error in the accounts.

Prepare a trial balance for Corporation W from the ending account balances.

Corporation W Trial Balance
Particulars	Debit ($)	Credit ($)
Cash	264,000
Accounts receivable	65,000
Inventory	20,000
Prepaid Insurance	6,000
Equipment	40,000
Accumulated depreciation		1,000
Accounts payable		20,000
Notes payable		30,000
Common stock		300,000
Sales revenue		120,000
Cost of goods sold	70,000
Rent expense	5,000
Depreciation expense	1,000
Total	471,000	471,000

Table (14)