Chapter 2, Problem 2SP

1.

To determine

Prepare journal entries to record the given transaction of Company S.

Explanation of Solution

Journal entry:

Journal entry is a set of economic events which can be measured in monetary terms. These are recorded chronologically and systematically.

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.

Prepare journal entries to record the given transaction of Company L as follows:

Journal
Date	Account Title and Explanation	Post	Debit	Credit
		Ref.	($)	($)
October 1	Cash	101	45,000
	Office Equipment	163	8,000
	Computer Equipment	167	20,000
	Common Stock	307		73,000
	(To record the amount invested on equipment in exchange of stock.)
October 2	Prepaid Rent	131	3,300
	Cash	101		3,300
	(To record the rent paid in advance.)
October 3	Computer Supplies	126	1,420
	Accounts Payable	201		1,420
	(To record the Purchase of supplies on credit.)
October 5	Prepaid Insurance	128	2,220
	Cash	101		2,220
	(To record Payment of premium for insurance)
October 6	Accounts Receivable	106	4,800
	Computer Services Revenue	403		4,800
	(To record the service performed on account.)
October 8	Accounts Payable	201	1,420
	Cash	101		1,420
	(To record the payment made for the balance due on account)
October 10	No entry necessary in the journal.
October 12	Accounts Receivable	106	1,400
	Computer Services Revenue	403		1,400
	(To record the service performed on account.)
October 15	Cash	101	4,800
	Accounts Receivable	106		4,800
	(To record the cash received from account receivable)
October 17	Repairs Expense—Computer	684	805
	Cash	101		805
	(To record the cash payment for the repair expense of computer).
October 20	Advertising Expense	655	1,728
	Cash	101		1,728
	(To record the advertisement expenses incurred).
October 22	Cash	101	1,400
	Accounts Receivable	106		1,400
	(To record the cash received from account receivable)
October 28	Accounts Receivable	106	5,208
	Computer Services Revenue	403		5,208
	(To record the cash received from account receivable)
October 31	Wages Expense	623	875
	Cash	101		875
	(To record the payment made for wages of the employees)
October 31	Dividends	319	3,600
	Cash	101		3,600
	(To record the payment of cash  dividends)
November 1	Mileage Expense	676	320
	Cash	101		320
	(To record the reimbursement expenses)
November 2	Cash	101	4,633
	Computer Services Revenue	403		4,633
	(To record the cash received from client)
November 5	Computer Supplies	126	1,125
	Cash	101		1,125
	(To record the Purchase of computer supplies for cash.)
November 8	Accounts Receivable	106	5,668
	Computer Services Revenue	403		5,668
	(To record the cash received from account receivable)
November 13	No entry necessary.
	(No revenue is recognized until the work is performed.)
November 18	Cash	101	2,208
	Accounts Receivable	106		2,208
	(To record the cash received on account)
November 22	Miscellaneous Expenses	677	250
	Cash	101		250
	(To record the amount of cash donated.)
November 24	Accounts Receivable	106	3,950
	Computer Services Revenue	403		3,950
	To record the cash received from account receivable).
November 25	No entry necessary.
November 28	Mileage Expense	676	384
	Cash	101		384
	(To record the reimbursement expenses)
November 30	Wages Expense	623	1,750
	Cash	101		1,750
	(To record the payment made for wages of the employees)
November 30	Dividends	319	2,000
	Cash	101		2,000
	(To record the payment of cash  dividends)

Table (1)

2.

To determine

Post the journal entries from Part 1 to their respective ledger accounts.

Explanation of Solution

Posting transactions:

The process of transferring the journalized transactions into the accounts of the ledger is known as posting the transactions.

Cash			Account. No. 101
Date	PR	Debit	Credit	Balance
October 1		45,000		45,000
2			3,300	41,700
5			2,220	39,480
8			1,420	38,060
15		4,800		42,860
17			805	42,055
20			1,728	40,327
22		1,400		41,727
31			875	40,852
31			3,600	37,252
November 1			320	36,932
2		4,633		41,565
5			1,125	40,440
18		2,208		42,648
22			250	42,398
28			384	42,014
30			1,750	40,264
30			2,000	38,264

Accounts Receivable			Account. No. 106
Date	PR	Debit	Credit	Balance
October 6		4,800		4,800
12		1,400		6,200
15			4,800	1,400
22			1,400	0
28		5,208		5,208
November 8		5,668		10,876
18			2,208	8,668
24		3,950		12,618

Computer Supplies			Account. No. 126
Date	PR	Debit	Credit	Balance
October 3		1,420		1,420
November 5		1,125		2,545

Prepaid Insurance			Account. No. 128
Date	PR	Debit	Credit	Balance
October 5		2,220		2,220

Prepaid Rent			Account. No. 131
Date	PR	Debit	Credit	Balance
October 2		3,300		3,300

Office Equipment			Account. No. 163
Date	PR	Debit	Credit	Balance
October 1		8,000		8,000

Computer Equipment			Account. No. 167
Date	PR	Debit	Credit	Balance
October 1		20,000		20,000

Accounts payable			Account. No. 201
Date	PR	Debit	Credit	Balance
October 3			1,420	1,420
8		1,420		0

Common stock			Account. No. 307
Date	PR	Debit	Credit	Balance
October 1			73,000	73,000

Dividends			Account. No. 319
Date	PR	Debit	Credit	Balance
October 31		3,600		3,600
November 5		2,000		5,600

Computer Services Revenue			Account. No. 403
Date	PR	Debit	Credit	Balance
October 6			4,800	4,800
12			1,400	6,200
28			5,208	11,408
2			4,633	16,041
8			5,668	21,709
24			3,950	25,659

Wages Expense			Account. No. 623
Date	PR	Debit	Credit	Balance
October 31		875		875
November 30		1,750		2,625

Advertising Expense			Account. No. 655
Date	PR	Debit	Credit	Balance
October 20		1,728		1,728

Mileage Expense			Account. No. 676
Date	PR	Debit	Credit	Balance
November 1		320		320
28		384		704

Miscellaneous Expenses			Account. No. 677
Date	PR	Debit	Credit	Balance
November 22		250		250

Repairs Expense—Computer			Account. No. 684
Date	PR	Debit	Credit	Balance
October 17		805		805

Table (2)

3.

To determine

Prepare a trial balance of Company L as of April 30.

Explanation of Solution

Trial balance:

Trial balance is a summary of all the asset, liability, and equity accounts and their balances.

Company B
Trial Balance
November 30
Particulars	Debit ($)	Credit ($)
Cash	$38,264
Accounts receivable	12,618
Computer supplies	2,545
Prepaid insurance	2,220
Prepaid rent	3,300
Office equipment	8,000
Computer equipment	20,000
Accounts payable		$0
Common stock		73,000
Dividends	5,600
Computer services revenue		25,659
Wages expense	2,625
Advertising expense	1,728
Mileage expense	704
Miscellaneous expense	250
Repairs expense-Computer	805
Totals	$98,659	$98,659

Table (3)