Concept explainers
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:
- On January 15, Rosenthal sold shares Of its common stock to William Hensley for $10,000
- On January 24, Rosenthal purchased S720 of painting supplies from Westwood Builders' Supply Company on account.
- On February 20, Rosenthal paid S720 cash to Westwood Builders' Supply Company for the
painting supplies purchased on January 24.
- On April 25, Rosenthal billed Bultman Condominiums $12,500 for painting and decorating services performed in April.
- On May 12, Rosenthal received $12,500 from Bultman Condominiums for the painting and decorating work billed in April.
- On June 5, Rosenthal sent Arlington Builders a $9,500 bill for a painting job completed on that day.
- On June 24, Rosenthal paid wages for work performed during the preceding week in the amount of $6,700.
Required:
- Prepare a
journal entry for each of the transactions. Post the transactions to T-accounts.- Prepare a
trial balance at June 30, 2019.
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 | ||
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 |
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 |
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