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 D are as follows: a. Cash borrowed from bank: Date Accounts title and explanation Ref. Debit ($) Credit ($) Cash (+A) 30,000 Notes payable (+L) 30,000 (To record cash borrowed from bank) Table (1) Cash is an assets account and it increased the value of asset by $30,000. Hence, debit the cash account for $30,000. Notes payable is a liability account, and it increased the value of liabilities by $30,000. Hence, credit the notes payable for $30,000. b. Cash paid to employee on notes: Date Accounts title and explanation Ref. Debit ($) Credit ($) Notes receivable (+A) 10,000 Cash (-A) 10,000 (To record cash paid to an employee on note) Table (2) Notes receivable is an assets account and it increased the value of asset by $10,000. Hence, debit the notes receivable account for $10,000. Cash is an assets account and it decreased the value of asset by $10,000. Hence, credit the cash account for $10,000. c. Issuance of common stock: Date Accounts title and explanation Ref. Debit ($) Credit ($) Cash (+A) 500 Common stock (+SE) (1) 10 Additional paid-in capital (+SE) (2) 490 (To record the issuance of common stock) Table (2) Cash is an assets account and it increased the value of asset by $500. Hence, debit the cash account for $500. Common stock is a component of stockholder’s equity and it increased the value of stockholder’s equity by $10, Hence, credit the common stock for $10. Additional paid-in capital is a component of stockholder’s equity and it increased the value of stockholder’s equity by $490, Hence, credit the additional paid-in capital for $490...

9th Edition

ISBN: 9781259222139

Author: Robert Libby, Patricia Libby, Frank Hodge Ch

Publisher: McGraw-Hill Education

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Chapter 2, Problem 2.8ME

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Record the journal entries of Company D.

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Evergreen Systems started the year with $980,000 in total assets and $450,000 in total liabilities. During the year, the company generated $160,000 in net income, paid $35,000 in dividends, and issued common stock worth $55,000. What is the company's total equity at the end of the year?

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Record the journal entries of Company D.

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

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Chapter 2 Solutions