Chapter 2, Problem 60BPSB

Problem 2-603 Journalizing and Posting Transactions

Findlay Testing Inc. provides water testing and maintenance services for owners of hot tubs and swimming pool. During September the following transactions occurred:

Sept. 1 Issued common stock for $20,000.

2 Purchased chemical supplies for $1,880 cash.

5 Paid office rent for October, November, and December; the rent is $800 per month.

8 Purchased $12.90 of advertising for September on account.

13 Billed the city of Bellefontaine $2,100 for testing the water in the city’s outdoor pools during September,

18 Received $3250 from Alexander Blanchard upon completion of overhaul of his swimming pool water circulation system. Since the job was completed and collected for on the same day, no bill was sent, to Blanchard.

Sept. 25 Received $835 from the city of Bellefontaine for water testing that was previously billed.

30 Recorded and paid September salaries of $3,970.

Required:

1. Prepare a journal entry for each transaction.

2. Post the journal entries to the appropriate T-accounts.

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 the each transaction.

Answer to Problem 60BPSB

Journal entries in the books of Findlay Testing Inc. for the month of September

Date	Account and Explanation	Debit	Credit
Sept.
1	Cash	$20,000
	Common Stock		$20,000
2	Supplies	1,880
	Cash		1,880
5	Prepaid Rent	2,400
	Cash		2,400
8	Advertising Expense	1,290
	Cash		1,290
13	Accounts Receivable	2,100
	Service Revenue		2,100
18	Cash	8,250
	Service Revenue		8,250
25	Cash	835
	Accounts Receivable		835
30	Wages Expense	3,970
	Cash		3,970

Explanation of Solution

Date	Assets	Liabilities	Stockholders’ Equity
Sept.
1	Increase (Cash)		Increase (Common Stock)
2	Increase (Supplies)
	Decrease (Cash)
5	Increase (Prepaid Rent)
	Decrease (Cash)
8	Decrease (Cash)		Decrease (Advertising Expense)
13	Increase (Accounts Receivable)		Increase (Service Revenue)
18	Increase (Cash)		Increase (Service Revenue)
25	Increase (Cash)
	Decrease (Accounts Receivable)
30	Decrease (Cash)		Decrease (Wages Expense)

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

Posting the journal entries into their concerned T-accounts

Answer to Problem 60BPSB

Accounts	Amount
Cash	$20,835
Accounts Receivable	1,265
Supplies	1,880
Prepaid Rent	2,400
Accounts Payable	1,290
Common Stock	20,000
Service Revenue	10,350
Wages Expense	3,970
Advertising Expense	1,290

Explanation of Solution

Cash

Sept. 1 20,000 18 8,250 25 835	Sept. 2 1,880 5 2,400 30 3,970
Bal. 20,835

Accounts Receivable

Sept. 13 2,100	Sept. 25 835
Bal. 1,265

Supplies

Sept. 3 1,880
Bal. 1,880

Prepaid Rent

Sept. 5 2,400
Bal. 2,400

Accounts Payable

	Sept. 8 1,290
	Bal. 1,290

Common Stock

	Sept. 1 20,000
	Bal. 20,000

Service Revenue

	Sept. 13 2,100 18 8,250
	Bal. 10,350

Wages Expense

Sept. 30 3,970
Bal. 3,970

Advertising Expense

Sept. 8 1,290
Bal. 1,290