Chapter 2, Problem 2.9AP

1.

To determine

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.

To Record: Each transaction of RH Expeditions for the month of December.

Explanation of Solution

Journalize the transactions of RH Expeditions for the month of December.

Date	Account Title and Explanation	Debit($)	Credit($)
December 1	Rent Expense	900
	Cash		900
	(To record the payment of rent expenses)
December 5	Cash	2,800
	Service Revenue		2,800
	(To record the revenues earned)
December 8	Cash	10,000
	Note Payable		10,000
	(To record the purchase of equipment)
December 12	Cash	3,500
	Accounts Receivable		3,500
	(To record the receipt of cash from revenues earned)
December 13	Cash	20,000
	Common Stock		20,000
	(To record the issuance of common stock)
December 15	Salaries Expense	1,200
	Cash		1,200
	(To record the payment of salaries expense)
December 17	Advertising Expense	1,000
	Cash		1,000
	(To record the payment of advertising expense)
December 22	Accounts Receivable	3,200
	Service Revenue		3,200
	(To record the revenues earned)
December 23	No journal entry
December 26	Equipment	28,500
	Cash		28,500
	(To record the purchase of equipment)
December 28	Accounts Payable	1,500
	Cash		1,500
	(To record the payment of cash)
December 31	Dividends	2,000
	Cash		2,000
	(To record the payment of cash dividends)

Table (1)

2. and 3.

To determine

T-account:

An account is referred to as a T-account, because the alignment of the components of the account resembles the capital letter ‘T’. An account consists of the three main components which are as follows:

• The title of the account
• The left or debit side
• The right or credit side

To Calculate: The balance of each account by posting each transaction to the appropriate T-accounts.

Explanation of Solution

Post the journal entries into T-accounts and determine the balance of each account.

Cash Account

Cash Account
Date	Details	Debit ($)		Date	Details	Credit ($)
December 1	Beginning Balance	9,200		December 1	Cash payment for rent	900
December 5	Cash received	2,800		December 15	Cash payment for Salaries	1,200
December 8	Cash borrowed	10,000		December 17	Cash payment for advertising	1,000
December 12	Cash collection	3,500		December 28	Cash payment for Equipment	28,500
December 13	Common stock	20,000		December 28	Cash payment to Accounts payable	1,500
				December 31	Dividends paid	2,000
				December 31	Closing balance	10,400
	Total	45,500			Total	45,500
December 31	Balance	10,400

Table (2)

Accounts Receivable

Accounts Receivable Account
Date	Details	Debit ($)		Date	Details	Credit ($)
December 1	Beginning balance	4,500		December 12	Cash collection from customers	3,500
December 22	Service on account	3,200		December 31	Closing balance	4,200
	Total	7,700			Total	7,700
December 31	Balance	4,200

Table (3)

Prepaid Insurance

Prepaid Insurance Account
Date	Details	Debit ($)		Date	Details	Credit ($)
December 1	Beginning balance	400		December 31	Closing balance	400
	Total	400			Total	400
December 31	Balance	400

Table (4)

Equipment

Equipment Account
Date	Details	Debit ($)		Date	Details	Credit ($)
December 1	Beginning balance	24,100		December 31	Closing balance	52,600
December 26	Purchased for cash	28,500
	Total	52,600			Total	52,600
December 31	Balance	52,600

Table (5)

Land

Land Account
Date	Details	Debit ($)		Date	Details	Credit ($)
December 1	Beginning balance	170,000		December 31	Closing balance	170,000
	Total	170,000			Total	170,000
December 31	Balance	170,000

Table (6)

Accounts Payable

Accounts Payable Account
Date	Details	Debit ($)		Date	Details	Credit ($)
December 28	Cash paid	1,500		December 1	Beginning balance	3,300
December 31	Closing balance	1,800
	Total	3,300			Total	3,300
				December 31	Balance	1,800

Table (7)

Notes Payable

Notes Payable Account
Date	Details	Debit ($)		Date	Details	Credit ($)
December 31	Closing balance	60,000		December 1	Beginning balance	50,000
				December 2	Cash borrowed	10,000
	Total	60,000			Total	60,000
				December 31	Balance	60,000

Table (8)

Common Stock

Common Stock Account
Date	Details	Debit ($)		Date	Details	Credit ($)
December 31	Closing balance	140,000		December 1	Beginning balance	120,000
				December 1	Cash	20,000
	Total	140,000			Total	140,000
				December 31	Balance	140,000

Table (9)

Retained earnings

Retained earnings Account
Date	Details	Debit ($)		Date	Details	Credit ($)
December 31	Closing balance	14,100		December 1	Beginning balance	14,100
	Total	14,100			Total	14,100
				September 30	Balance	14,100

Table (10)

Dividends

Dividends Account
Date	Details	Debit ($)		Date	Details	Credit ($)
December 1	Beginning balance	5,000		July 31	Closing Balance	7,000
December 31	Dividends paid	2,000
	Total	7,000			Total	7,000

Table (11)

Service revenue

Service revenue
Date	Details	Debit ($)		Date	Details	Credit ($)
December 31	Closing balance	81,000		December 1	Beginning balance	75,000
				December 5	Cash	2,800
				December 22	Accounts receivable	3,200
	Total	81,000			Total	81,000
				December 31	Balance	81,000

Table (12)

Advertising Expense

Advertising Expense Account
Date	Details	Debit ($)		Date	Details	Credit ($)
December 1	Beginning balance	11,000		December 31	Closing balance	12,000
December 17	Cash	1,000
Total		12,000		Total		12,000
December 31	Balance	12,000

Table (13)

Salaries Expense

Salaries Expense Account
Date	Details	Debit ($)		Date	Details	Credit ($)
December 1	Beginning balance	28,300		December 31	Closing balance	29,500
December 15	Cash	1,200
	Total	29,500			Total	29,500
December 31	Balance	29,500

Table (14)

Rent Expense

Rent Expense Account
Date	Details	Debit ($)		Date	Details	Credit ($)
December 1	Beginning balance	9,900		December 31	Closing balance	10,800
December 1	Cash	900
Total		10,800		Total		10,800
December 31	Balance	10,800

Table (15)

4.

To determine

Trial balance:

A trial balance is the summary of all the ledger accounts. Debit balances are listed in left column and credit balances are listed in right column of the trial balance. The totals of debit and credit column should be equal. The trial balance is usually prepared to check the accuracy of ledger accounts balances, before the preparation of financial statements.

To Prepare: A trial balance as of December.

Explanation of Solution

Prepare the trial balance of RH Expeditions for the month of December.

RH Expeditions
Trial Balance
December 31
Accounts	Debit ($)	Credit ($)
Cash	10,400
Accounts Receivable	4,200
Prepaid Insurance	400
Equipment	52,600
Land	170,000
Accounts Payable		1,800
Notes Payable		60,000
Common Stock		140,000
Retained Earnings		14,100
Dividends	7,000
Service revenue		81,000
Advertising Expense	12,000
Salaries Expense	29,500
Rent Expense	10,800
Total	296,900	296,900

Table (16)

Conclusion

Hence, the trial balance is prepared, and the debit column and credit column of the trial balance are agreed, both having balance of $296,900.