Requirement – 1 Explanation Inventory: Inventory refers to the stock of goods purchased, utilized and maintained by the company in the course of regular business activities. Inventory: Inventory refers to the stock of goods purchased, utilized and maintained by the company in the course of regular business activities. nventory: Inventory refers to the stock of goods purchased, utilized and maintained by the company in the course of regular business activities. Inventory: Inventory refers to the stock of goods purchased, utilized and maintained by the company in the course of regular business activities. Inventory: Inventory refers to the stock of goods purchased, utilized and maintained by the company in the course of regular business activities. 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 D are as follows: a. Issuance of common stock: Date Accounts title and explanation Ref. Debit ($) Credit ($) Cash 3,500 Common stock 3,500 (To record the issuance of common stock) Table (1) Cash is an assets account and it increased the value of asset by $3,500. Hence, debit the cash account for $3,500. Common stock is a component of stockholder’s equity and it increased the value of stockholder’s equity by $3,500. Hence, credit the common stock for $3,500. b. Service performed to a customer in cash: Date Accounts title and explanation Ref. Debit ($) Credit ($) Cash 6,500 Service revenue 6,500 (To record cash received from customer for service) Table (2) Cash is an assets account and it increased the value of asset by $6,500. Hence, debit the cash account for $6,500. Service revenue is a revenue account and it increased the value of stockholder’s equity by $6,500. Hence, credit the service revenue account for $6,500. c. Cash paid to creditors: Date Accounts title and explanation Ref. Debit ($) Credit ($) Accounts payable 4,400 Cash 4,400 (To record cash paid to creditors) Table (3) Accounts payable is a liability account and it decreased the value of liability by $4,400. Hence, debit the accounts payable account by $4,400. Cash is an assets account and it decreased the value of asset by $4,400. Hence, credit the cash account for $4,400. d. Supplies purchased on account: Date Accounts title and explanation Ref. Debit ($) Credit ($) Supplies 1,200 Accounts payable 1,200 (To record purchase of supplies on account) Table (4) Supplies are an assets account and it increased the value of asset by $1,200... Requirement – 2 To determine To prepare: T-accounts for given transaction. Requirement – 3 To determine The closing balance of each account

Financial Accounting, Student Value Edition (12th Edition)

12th Edition

ISBN: 9780134727066

Author: C. William Thomas, Wendy M. Tietz, Walter T. Harrison Jr.

Publisher: PEARSON

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Chapter 2, Problem 2.65BP

Requirement – 1

To determine

To prepare: The journal entries of Company D.

Requirement – 2

To determine

To prepare: T-accounts for given transaction.

Requirement – 3

To determine

The closing balance of each account

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Chapter 2, Problem 2.64BP

Chapter 2, Problem 2.66BP

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Chapter 2 Solutions

Financial Accounting, Student Value Edition (12th Edition)

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The journal entries of Company D.

Solution Summary: The author explains the journal entries of Company D. Inventory refers to the stock of goods purchased, utilized and maintained by the company.

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To prepare: The journal entries of Company D.

To prepare: T-accounts for given transaction.

The closing balance of each account

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Chapter 2 Solutions