Chapter 2, Problem 4AP

1.

To determine

Prepare the journal entries for the given transactions.

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 equities.
• Credit, all increase in liabilities, revenues, and equities, all decrease in assets, and expenses.

Prepare the journal entries for the given transactions as follows:

Date		Account Title and Explanation	Post Ref.	Debit	Credit
				($)	($)
	a.	Cash	101	60,000
		Office Equipment	163	25,000
		Common Stock	307		85,000
		(To record owner invested cash and equipment for stock)
	b.	Land	172	40,000
		Building	170	160,000
		Cash	101		30,000
		Notes Payable	250		17,000
		(To record purchase of  land and building in cash and on note payable)
	c.	Office supplies	108	2,000
		Accounts payable	201		2,000
		(To record office supplies purchased on account)
	d.	Automobiles	164	16,500
		Common stock	307		16,500
		(To record owner contribute automobile to business for stock)
	e.	Office Equipment	163	5,600
		Accounts Payable	201		5,600
		(To record equipment purchased on credit)
	f.	Salaries  Expense	601	1,800
		Cash	101		1,800
		(To record salaries expense paid in cash)
	g.	Cash	101	8,000
		Fees earned	402		8,000
		(To record fees earned from customers)
	h.	Utilities expense	602	1,150
		Cash	201		1,150
		(To record utilities expense paid in cash)
	i.	Accounts Payable	201	2,000
		Cash	101		2,000
		(To cash paid to supplier)
	j.	Office equipment	163	20,300
		Cash	101		20,300
		(To record office equipment purchased in cash)
	k.	Accounts receivable	106	6,250
		Fees earned	402		6,250
		(To record service performed on account)
	l.	Salaries  Expense	601	1,800
		Cash	101		1,800
		(To record salaries expense paid in cash)
	m.	Cash	101	4,000
		Accounts receivable	106		4,000
		(To record cash received from credit customer)
	n.	Dividends	319	2,800
		Cash	101		2,800
		(To record dividend paid to investors)

Table (1)

2.

To determine

Post the journal entries to the general 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.

Post the journal entries to the general ledger accounts as follows:

Cash No. 101
Date	PR	Debit	Credit	Balance
		($)	($)	($)
(a)		60,000		60,000
(b)			30,000	30,000
(f)			1,800	28,200
(g)		8,000		36,200
(h)			635	35,565
(i)			2,000	33,565
(j)			20,300	13,265
(l)			1,800	11,465
(m)		4,000		15,465
(n)			2,800	12,665

Accounts Receivable No. 106
Date	PR	Debit	Credit	Balance
		($)	($)	($)
(k)		6,250		6,250
(m)			4,000	2,250

Office supplies  No. 108
Date	PR	Debit	Credit	Balance
		($)	($)	($)
(c)		2,000		2,000

Office equipment No. 163
Date	PR	Debit	Credit	Balance
		($)	($)	($)
(a)		25,000		25,000
(e)		5,600		30,600
(j)		20,300		50,900

Automobiles No. 164
Date	PR	Debit	Credit	Balance
		($)	($)	($)
(d)		16,500		16,500

Building No. 170
Date	PR	Debit	Credit	Balance
		($)	($)	($)
(b)		160,000		160,000

Land No. 172
Date	PR	Debit	Credit	Balance
		($)	($)	($)
(b)		40,000		40,000

Accounts Payable No. 201
Date	PR	Debit	Credit	Balance
		($)	($)	($)
(c)			2,000	2,000
(e)			5,600	7,600
(i)		2,000		5,600

Notes Payable No. 250
Date	PR	Debit	Credit	Balance
		($)	($)	($)
(b)			170,000	170,000

Common Stock No. 307
Date	PR	Debit	Credit	Balance
		($)	($)	($)
(a)			85,000	85,000
(d)			16,500	101,500

Dividends No. 319
Date	PR	Debit	Credit	Balance
		($)	($)	($)
(n)		2,800		2,800

Fees Earned No. 402
Date	PR	Debit	Credit	Balance
		($)	($)	($)
(g)			8,000	8,000
(k)			6,250	14,250

Salaries Expense No. 601
Date	PR	Debit	Credit	Balance
		($)	($)	($)
(f)		1,800		1,800
(l)		1,800		3,600

Utilities Expense No. 602
Date	PR	Debit	Credit	Balance
		($)	($)	($)
(h)		635		635

3.

To determine

Prepare a trial balance as of the end of September.

Explanation of Solution

Trial balance:

Trial balance is a summary of all the ledger accounts balances presented in a tabular form with two column, debit and credit. It checks the mathematical accuracy of the ledger postings and helps preparing the final accounts.

Prepare a trial balance as of the end of September as follows:

Company H
Trial Balance
September 30
Particulars	Debit ($)	Credit ($)
Cash	12,665
Accounts receivable	2,250
Office supplies	2,000
Office equipment	50,900
Automobiles	16,500
Building	160,000
Land	40,000
Accounts payable		5,600
Notes payable		170,000
Common stock		101,500
Dividends	2,800
Fees earned		14,250
Salaries expense	3,600
Utilities expense	635
Total	291,350	291,350

Table (2)

Therefore, the total of debit, and credit columns of a trial balance is $291,350 and agree.