Chapter 2, Problem 52E

Exercise 2-52 Accounting Cycle

Rosenthal Decorating Inc. is a commercial painting and decorating contractor that began operations in January 2019. The following transactions occurred during the year:

1. On January 15, Rosenthal sold shares Of its common stock to William Hensley for $10,000
2. On January 24, Rosenthal purchased S720 of painting supplies from Westwood Builders' Supply Company on account.
3. On February 20, Rosenthal paid S720 cash to Westwood Builders' Supply Company for the

painting supplies purchased on January 24.

1. On April 25, Rosenthal billed Bultman Condominiums $12,500 for painting and decorating services performed in April.
2. On May 12, Rosenthal received $12,500 from Bultman Condominiums for the painting and decorating work billed in April.
3. On June 5, Rosenthal sent Arlington Builders a $9,500 bill for a painting job completed on that day.
4. On June 24, Rosenthal paid wages for work performed during the preceding week in the amount of $6,700.

Required:

1. Prepare a journal entry for each of the transactions.
2. Post the transactions to T-accounts.
3. Prepare a trial balance at June 30, 2019.

To determine

Journal Entries:

Journal entries are medium of recording business transactions. A business enterprise must record all the business transaction to evaluate net income or loss and analyze the financial performance of a company during a specified accounting period.

Requirement 1

Journalize each of the transactions.

Answer to Problem 52E

Date	Accounts and Explanation	Debit	Credit
January
15	Cash	$10,000
	Common Stock		$10,000
24	Supplies	720
	Accounts Payable		720
February
20	Accounts Payable	720
	Cash		720
April
25	Accounts Receivable	12,500
	Service Revenue		12,500
May
12	Cash	12,500
	Accounts Receivable		12,500
June
5	Accounts Receivable	9,500
	Service Revenue		9,500
24	Wages Expense	6,700
	Cash		6,700

Explanation of Solution

Date	Explanation	Increase	Decrease
January
15	Cash	$10,000
	Common Stock	10,000
24	Supplies	720
	Accounts Payable	720
February
20	Accounts Payable		$720
	Cash		720
April
25	Accounts Receivable	12,500
	Service Revenue	12,500
May
12	Cash	12,500
	Accounts Receivable		12,500
June
5	Accounts Receivable	9,500
	Service Revenue	9,500
24	Wages Expense	6,700
	Cash		6,700

To determine

Introduction:

T-accounts as its name derived from shape of the account, is representation of business transaction in their respective account. It helps in organizing and analyzing the transaction according to their similar nature of account.

Requirement 2

Post the transactions to T-accounts.

Answer to Problem 52E

Accounts	Balance
Cash	$15,080
Accounts Receivable	9,500
Supplies	720
Accounts Payable	0
Common Stock	10,000
Service Revenue	22,000
Wages Expense	6,700

Explanation of Solution

Cash

Jan. 15 10,000 May 12 12,500	720 Feb. 20 6,700 Jun. 24
Bal. 15,080

Accounts Receivable

Apr. 25 12,500 June 5 9,500	12,500 May 12
Bal. 9,500

Supplies

Jan. 24 720
Bal. 720

Accounts Payable

Feb. 20 720	720 Jan. 24
	0 Bal.

Common Stock

	10,000 Jan. 15
	10,000 Bal.

Service Revenue

	12,500 Apr. 25 9,500 Jun. 5
	22,000 Bal.

Wages Expense

Jun. 24 6,700
Bal. 6,700

To determine

Introduction:

A financial statement which integrates all the balance of ledger accounts is termed as a trial balance. The total balance of debit and credit in trial balance should be equal at end of an accounting period.

Requirement 3

To Prepare:

Prepare a trial balance as June 30, 2019.

Answer to Problem 52E

The trial balance shows a total balance of $32,000.

Explanation of Solution

Rosenthal Decorating Inc.Trial Balance as of June 30, 2019
Accounts	Debit	Credit
Cash	15,080
Accounts Receivable	9,500
Supplies	720
Accounts Payable		0
Common Stock		10,000
Service Revenue		22,000
Wages Expense	6,700
Total	32,000	32,000