Concept explainers
Problem 2-6B The Accounting Cycle
Sweetwater Temporary Clerical Help Service opened for business in June 2019. From the opening until the end of the year. Sweetwater engaged in the activities described below. So that a realistic
- Sold 10,000 shares of common stock for $4.50 per share.
- Purchased office equipment from Furniture Max Inc. for $18,110 cash.
- Received $112,880 from clients for services provided.
- Paid wages $87,300.
- Borrowed $20,000 from the Bank of America on a 3-year note payable.
- Paid office rent of $10,200
- Purchased office supplies on credit for $2,120 from Office Supply Inc.
- Paid $1,200 toward the payable established in Transaction g.
- Paid utility charges incurred during the year of $3,250.
Required:
1. Analyze the events for their effect on the
2. Prepare
3.
4. Prepare a trial balance at December 31, 2019.
Accounting Equation:
The accounting equation explains that the assets must be equal to the liabilities and stockholders’ equity on the occurrence of a business transaction. The dual aspect concept of accounting signifies that on each transaction the elements of the accounting equations are affected equally.
Requirement 1
Determine:
Analyze the events for their effect on the accounting equation.
Answer to Problem 61BPSB
Accounting Equation | |||
Asset = Liabilities + Stockholders’ Equity | |||
a. | $45,000 | $45,000 | |
b. | 18,710 | ||
(18,710) | |||
c. | 112,880 | 112,880 | |
d. | (87,300) | (87,300) | |
e. | 20,000 | 20,000 | |
f. | (10,200) | (10,200) | |
g. | 2,120 | 2,120 | |
h. | (1,200) | (1,200) | |
i. | (3,250) | (3,250) |
Explanation of Solution
Accounting Equation | |||
Asset = Liabilities + Stockholders’ Equity | |||
a. | Increase | Increase | |
b. | Increase | ||
Decrease | |||
c. | Increase | Increase | |
d. | Decrease | Decrease | |
e. | Increase | Increase | |
f. | Decrease | Decrease | |
g. | Increase | Increase | |
h. | Decrease | Decrease | |
i. | Decrease | Decrease |
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 2
To Prepare:
Prepare journal entries for the transaction during 2019.
Answer to Problem 61BPSB
Events | Accounts and Explanation | Debit | Credit |
a. | Cash | $45,000 | |
Common Stock | $45,000 | ||
b. | Equipment | 18,710 | |
Cash | 18,710 | ||
c. | Cash | 112,880 | |
Service Revenue | 112,880 | ||
d. | Wages Expense | 87,300 | |
Cash | 87,300 | ||
e. | Cash | 20,000 | |
Notes Payable | 20,000 | ||
f. | Rent Expense | 10,200 | |
Cash | 10,200 | ||
g. | Supplies | ||
Accounts Payable | 2,120 | ||
2,120 | |||
h. | Accounts Payable | 1,200 | |
Cash | 1,200 | ||
i. | Utilities Expense | 3,250 | |
Cash | 3,250 | ||
Explanation of Solution
Accounting Equation | |||
Asset = Liabilities + Stockholders’ Equity | |||
a. | Increase (Cash) | Increase (Common Stock) | |
b. | Increase (Equipment) | ||
Decrease (Cash) | |||
c. | Increase (Cash) | Increase (Service Revenue) | |
d. | Decrease (Cash) | Decrease (Wages Expense) | |
e. | Increase (Cash) | Increase (Notes Payable) | |
f. | Decrease (Cash) | Decrease (Rent Expense) | |
g. | Increase (Supplies) | Increase (Accounts Payable) | |
h. | Decrease (Cash) | Decrease (Accounts Payable) | |
i. | Decrease (Cash) | Decrease (Utilities Expense) |
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 3
Prepare:
Posting the journal entries to T-accounts.
Answer to Problem 61BPSB
Accounts | Balance |
Cash | $57,220 |
Supplies | 2,120 |
Equipment | 18,710 |
Accounts Payable | 920 |
Notes Payable | 20,000 |
Common Stock | 45,000 |
Service Revenue | 112,880 |
Rent Expense | 10,200 |
Utilities Expense | 3,250 |
Wages Expense | 87,300 |
Explanation of Solution
Cash
a. 45,000 c. 112,880 e. 20,000 | b. 18,710 d. 87,300 f. 10,200 h. 1,200 i. 3,250 |
Bal. 57,220 |
Supplies
g. 2,120 | |
Bal. 2,120 |
Equipment
b. 18,710 | |
Bal. 18,710 |
Accounts Payable
h. 1,200 | g. 2,120 |
Bal. 920 |
Notes Payable
e. 20,000 | |
Bal. 20,000 |
Common Stock
a. 45,000 | |
Bal. 45,000 |
Service Revenue
c. 112,880 | |
Bal. 112,880 |
Rent Expense
f. 10,200 | |
Bal. 10,200 |
Utilities Expense
i. 3,250 | |
Wages Expense
d. 87,300 | |
Bal. 87,300 |
Trial Balance:
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
Prepare:
Prepare the trial balance as of December 31, 2019.
Answer to Problem 61BPSB
The total balance of the trial balance for the year ending December 31, 2019 is $178,800.
Explanation of Solution
Sweetwater Temporary Clerical Help ServiceTrial Balance December 31, 2019 | ||
Accounts | Debit | Credit |
Cash | $57,220 | |
Supplies | 2,120 | |
Equipment | 18,710 | |
Accounts Payable | $920 | |
Notes Payable | 20,000 | |
Common Stock | 45,000 | |
Service Revenue | 112,880 | |
Rent Expense | 10,200 | |
Utilities Expense | 3,250 | |
Wages Expense | 87,300 | |
Total | $178,800 | $178,800 |
Want to see more full solutions like this?
Chapter 2 Solutions
Cornerstones of Financial Accounting
- Lavender Company started its business on April 1, 2019. The following are the transactions that happened during the month of April. Prepare the journal entries in the journal on Page 1. A. The owners invested $7,500 from their personal account to the business account. B. Paid rent $600 with check #101. C. Initiated a petty cash fund $250 check #102. D. Received $350 cash for services rendered. E. Purchased office supplies for $125 with check #103. F. Purchased computer equipment $1,500, paid $500 with check #104, and will pay the remainder in 30 days. G. Received $750 cash for services rendered. H. Paid wages $375, check #105. I. Petty cash reimbursement Office Supplies $50, Maintenance Expense $80, Miscellaneous Expense $60. Cash on hand $8. Check #106. J. Increased Petty Cash by $70, check #107.arrow_forwardJournal Entries Castle Consulting Agency began business in February. The transactions entered into by Castle during its first month of operations are as follows: Acquired articles of incorporation from the state and issued 10,000 shares of capital stock in exchange for $150,000 in cash. Paid monthly rent of $400. Signed a five-year promissory note for $100,000 at the bank. Purchased software to be used on future jobs. The software costs $950 and is expected to be used on five to eight jobs over the next two years. Billed customers $12,500 for work performed during the month. Paid office personnel $3,000 for the month of February. Received a utility bill of $100. The total amount is due in 30 days. Required Prepare in journal form, the entry to record each transaction.arrow_forwardPrepare journal entries for the transactions for Gordon Co for the month of July 2021. 7/2 Barry Gordon invested 30,000 to start the business Paid 1,100 for the current month's renf Purchased 1,500 of supplies on account. Purchased advertising from Evening Journal at a cost of 1,250 payable in 15 days. 7/15 Provided 2,000 of service to H Co. collected 500 cash and balance on account 7/3 7/5 7/9 7/19 Paid for advertising purchased from the Evening Journal on 7/9 7/21 Purchased equipment from T Co. for 6,500, paid cash 1,500 and balance on account 7/24 Hired assistant at a salary of 750 per week 7/28 Received 1,000 cash advance for service to be provided in August 7/29 Received utility bill for 225 7/30 Collected accounts receivable from H Co. Gordon withdrew 2,000 cash for personal use Paid assistant 750 salary for the week. 7/31 7/31arrow_forward
- Post to the ledger T-accounts and determine month-end balances. (Post entries in the order of journal entries presented in the previous part.) → - A A → + + + + 4 + I Cash I Supplies = A Accounts Receivable Common Stock + Service Revenue → Accounts Payable Unearned Service Revenue + + + + → > + → + → Salaries and Wages Expense Rent Expense = #arrow_forwardQuestion 2 At the beginning of the year, HR-Plus consulting had a net accounts receivable balance of 1,200,000. This balance includes an Allowance for Doubtful Accounts of $62,500, During the year, the following transactions occurred: Total Sales on account were $15,280,000 • Wrote off $43,000 from the Department of Forestry as uncollectable At year end, the accounts receivable balances were as follows: Age Collection Probability Amount 0-30 days 98% $800,000 31-60 days 90% 400,000 61-90 days 75% 116,000 Over 90 days 50% 16,000 REQUIRED: Show the transactions for items i and ii How much Accounts Receivable was collected during the year Calculate the ending balance of the Allowance for Doubtful Accountsarrow_forwardcould really use some help with this problemarrow_forward
- Prepare the financial statemetnsarrow_forwardSearth Summer 19/201 Sport Direct, a sport stuff shop. At the beginning of the current season, the ledger of Sport Direct shop showed cash $2,200, Inventory $1,800, and Share capital - Ordinary $4,000. The following transactions were completed during April NOTE: Answer questions from 1 - 25 by using these information. April 1) Purchased Truck costing $9,600 by signing $9,600, 12%, 6-month notes payable. April 4) Purchased racquets and balls from Jay-Mac Co. for $760, FOB Shipping point, terms 2/10,n/30. April 5) Purchased Building for $48,000 cash, April 6) Paid Freight on purchase from Jay-Mac Co. for $40 cash. April 7) Purchased Supplies for $2,500 cash. April 8) Sold Merchandise to members for $1,150 on account terms n/30. The merchandise sold had a cost of $790 April 9) Paid office rent $1,500 cash. April 10) Returned merchandise for Jay-Mac Co. for $60, for a racquets that were defective, April 11) Purchased tennis shoes from u Sports for $420 cash. April 13) Paid Jay-Mac Co. in…arrow_forwardComplete the General Journal for the following scenarioarrow_forward
- Can you show me what the general ledgers would look like. I have them done just want to double check my workarrow_forwarddont give answer in image formatarrow_forwardDomingo Company started its business on January 1, 2019. The following transactions occurred during the month of May. Prepare the journal entries in the journal on Page 1. A. The owners invested $10,000 from their personal account to the business account. B. Paid rent $500 with check #101. C. Initiated a petty cash fund $500 with check #102. D. Received $1,000 cash for services rendered. E. Purchased office supplies for $158 with check #103. F. Purchased computer equipment $2,500, paid $1,350 with check #104, and will pay the remainder in 30 days. G. Received $800 cash for services rendered. H. Paid wages $600, check #105. I. Petty cash reimbursement: office supplies $256, maintenance expense $108, postage expense $77, miscellaneous expense $55. Cash on hand $11. Check #106. J. Increased petty cash by $30, check #107.arrow_forward
- Financial Accounting: The Impact on Decision Make...AccountingISBN:9781305654174Author:Gary A. Porter, Curtis L. NortonPublisher:Cengage LearningCornerstones of Financial AccountingAccountingISBN:9781337690881Author:Jay Rich, Jeff JonesPublisher:Cengage LearningPrinciples of Accounting Volume 1AccountingISBN:9781947172685Author:OpenStaxPublisher:OpenStax College
- Century 21 Accounting Multicolumn JournalAccountingISBN:9781337679503Author:GilbertsonPublisher:Cengage