Chapter 2, Problem 2.9BP

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 T Cat Services for the month of December.

Explanation of Solution

Journalize the transactions of T Cat Services for the month of December.

Date	Account Title and Explanation	Debit($)	Credit($)
December 1	Cash	27,400
	Service Revenue		27,400
	(To record the service revenue for cash)
December 4	Pet Supplies	2,900
	Accounts Payable		2,900
	(To record the purchase of office supplies on Accounts Payable)
December 8	Advertising Expenses	3,200
	Accounts Payable		3,200
	(To record the advertising expenses on account)
December 9	Accounts payable	2,900
	Cash		2,900
	(To record the payment of cash )
December 12	Cash	5,000
	Common Stock		5,000
	(To record the issuance of common stock)
December 9	Accounts payable	6,300
	Cash		6,300
	(To record the payment of cash )
December 19	Equipment	7,700
	Cash		7,700
	(To record the purchase of equipment)
December 22	Utilities expenses	4,500
	Cash		4,500
	(To record the payment of utility expenses)
December 24	Cash	2,300
	Deferred Revenue		2,300
	(To record the receipt of cash in advance for deferred service revenue)
December 27	No entry
December 30	Salaries Expense	7,000
	Cash		7,000
	(To record the payment of salary expenses)
December 31	Dividends	3,000
	Cash		3,000
	(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	19,400		December 8	Advertising	3,200
December 1	Cash Sales	27,400		December 9	Accounts payable	2,900
December 12	Common stock	5,000		December 16	Accounts payable	6,300
December 24	Cash collection	2,300		December 19	Equipment	7,700
				December 22	Utilities	4,500
				December 30	Salaries	7,000
				December 31	Dividends	3,000
				December 31	Closing balance	19,500
	Total	54,100			Total	54,100
December 31	Balance	19,500

Table (2)

Supplies

Supplies Account
Date	Details	Debit ($)		Date	Details	Credit ($)
December 1	Beginning balance	1,500		December 31	Closing balance	4,400
December 4	Accounts payable	2,900
	Total	4,400			Total	4,400
December 31	Balance	4,400

Table (3)

Prepaid Rent

Prepaid Rent Account
Date	Details	Debit ($)		Date	Details	Credit ($)
December 1	Beginning Balance	7,200		December 31	Closing Balance	7,200
July 31	Total	7,200			Total	7,200

Table (4)

Equipment

Equipment Account
Date	Details	Debit ($)		Date	Details	Credit ($)
December 1	Beginning balance	83,700		December 31	Closing Balance	91,400
December 19	Cash	7,700
December 31	Total	91,400			Total	91,400

Table (5)

Building

Building Account
Date	Details	Debit ($)		Date	Details	Credit ($)
December 1	Beginning balance	240,000		December 31	Closing balance	240,000
	Total	240,000			Total	240,000
December 31	Balance	240,000

Table (6)

Accounts Payable

Accounts Payable Account
Date	Details	Debit ($)		Date	Details	Credit ($)
December 9	Cash paid	2,900		December 1	Beginning Balance	9,800
December 16	Cash paid	6,300		December 4	Supplies	2,900
December 31	Closing balance	3,500
	Total	12,700			Total	12,700
				December 31	Balance	3,500

Table (7)

Unearned Service revenue

Unearned Service revenue Account
Date	Details	Debit ($)		Date	Details	Credit ($)
June 30	Closing Balance	4,300		December 1	Beginning balance	2,000
				December 24	Cash	2,300
	Total	4,300			Total	4,300

Table (8)

Common Stock

Common Stock Account
Date	Details	Debit ($)		Date	Details	Credit ($)
December 31	Closing balance	130,000		December 1	Beginning balance	125,000
				December 12	Issued	5,000
	Total	130,000			Total	130,000
				December 31	Balance	130,000

Table (9)

Retained earnings

Retained earnings Account
Date	Details	Debit ($)		Date	Details	Credit ($)
December 31	Closing balance	75,500		December 1	Beginning balance	75,500
	Total	75,500			Total	75,500
				December 31	Balance	75,500

Table (10)

Dividends

Dividends Account
Date	Details	Debit ($)		Date	Details	Credit ($)
December 1	Beginning balance	9,000		December 31	Closing balance	12,000
December 31	Cash	3,000
	Total	12,000			Total	12,000
December 31	Balance	12,000

Table (11)

Service revenue

Service revenue
Date	Details	Debit ($)		Date	Details	Credit ($)
December 31	Closing balance	291,400		December 1	Beginning balance	264,000
				December 1	Cash	27,400
	Total	291,400			Total	291,400
				December 31	Balance	291,400

Table (12)

Salaries Expense

Salaries Expense Account
Date		Details		Debit ($)		Date	Details	Credit ($)
December 1		Beginning balance		65,000		December 31	Closing balance	72,000
December 31	Cash		7,000
		Total		72,000			Total	72,000
December 31		Balance		72,000

Table (13)

Advertising Expense

Advertising Expense Account
Date	Details	Debit ($)		Date	Details	Credit ($)
December 1	Beginning balance	18,200		December 31	Closing balance	21,400
December 8	cash	3,200
Total		21,400		Total		21,400
December 31	Balance	21,400

Table (14)

Utilities Expense

Utilities Expense Account
Date	Details	Debit ($)		Date	Details	Credit ($)
December 1	Beginning balance	32,300		December 31	Closing balance	36,800
December 31	Cash	4,500
Total		36,800		Total		36,800
December 31	Balance	36,800

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 T Cat Services for the month of December.

T Cat Services
Trial Balance
For the Month Ended December 31
Accounts	Debit ($)	Credit ($)
Cash	19,500
Prepaid Rent	4,400
Supplies	7,200
Equipment	91,400
Building	240,000
Accounts Payable		3,500
Unearned Service Revenue		4,300
Common Stock		130,000
Retained Earnings		75,500
Dividends	12,000
Service Revenue		291,400
Salaries Expense	72,000
Advertising Expense	21,400
Utilities Expense	36,800
Total	504,700	504,700

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 $504,700.