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Explanation of Solution
Journal:
Journal is the method of recording monetary business transactions in chronological order. It records the debit and credit aspects of each transaction to abide by the double-entry system.
Rules of Debit and Credit:
Following rules are followed for debiting and crediting different accounts while they occur in business transactions:
Ø Debit, all increase in assets, expenses and dividends, all decrease in liabilities, revenues and stockholders’ equities.
Ø Credit, all increase in liabilities, revenues, and stockholders’ equities, all decrease in assets, and expenses.
Prepare journal entry to record the amount of $9,000 invested by the Person R to begin the business.
Date | Account Titles and Explanations | Debit ($) | Credit ($) |
April 1 | Cash | 9,000 | |
Common Stock | 9,000 | ||
(To record shares purchased for cash) |
(Table 1)
- Cash is an asset and there is an increase in the value of an asset. Hence, debit the cash by $9,000.
- Common stock is a component of
stockholder’s equity and there is an increase in the value of equity. Hence, credit the common stock by $9,000.
Prepare journal entry to record payment of six months’ lease on van.
Date | Account Titles and Explanations | Debit ($) | Credit ($) |
April 2 | Prepaid van lease | 2,850 | |
Cash | 2,850 | ||
(To record advance payment of 6 months lease on van) |
(Table 2)
- Prepaid van lease is an asset account and there is an increase in the value of asset. Hence, debit, the prepaid van lease by $2,850.
- Cash is an asset and there is a decrease in the value of an asset. Hence, credit the cash by $2,850.
Prepare journal entry to record money borrowed from the bank and signed a notes payable agreeing to repay the $10,000 in one year plus 10 percent increase.
Date | Account Titles and Explanations | Debit ($) | Credit ($) |
April 3 | Cash | 10,000 | |
Notes payable | 10,000 | ||
(To record cash received by issuing a note with 10% interest) |
(Table 3)
- Cash is an asset and there is an increase in the value of an asset. Hence, debit the cash by $10,000.
- Notes payable is a liability and there is an increase in the value of a liability. Hence, credit the notes payable by $10,000.
Prepare journal entry to record purchase of cleaning equipment for $5,500 and paid $2,500 down with the remainder due within 30 days.
Date | Account Titles and Explanations | Debit ($) | Credit ($) |
April 3 | Equipment | 5,500 | |
Cash | 2,500 | ||
Accounts payable | 3,000 | ||
(To record purchase of cleaning equipment) |
(Table 4)
- Equipment is an asset and there is an increase in the value of an asset. Hence, debit the equipment by $5,500.
- Cash is an asset and there is a decrease in the value of an asset. Hence, credit the cash by $2,500.
- Accounts payable is a liability and there is an increase in the value of a liability. Hence, credit the accounts payable by $3,000.
Prepare journal entry to record purchasing of cleaning supplies for $4,300 cash.
Date | Account Titles and Explanations | Debit ($) | Credit ($) |
April 4 | Supplies | 4,300 | |
Cash | 4,300 | ||
(To record payment for supplies) |
(Table 5)
- Supplies are an asset and there is an increase in the value of an asset. Hence, debit the supplies by $4,300.
- Cash is an asset and there is a decrease in the value of an asset. Hence, credit the cash by $4,300.
Prepare journal entry to record payment made for newspaper advertisement to run during April.
Date | Account Titles and Explanations | Debit ($) | Credit ($) |
April 7 | Advertising Expense | 350 | |
Cash | 350 | ||
(To record advertising expense payment) |
(Table 6)
- Advertising expense is a component of stockholder’s equity and there is an increase the value of expense. Hence, debit the cash by $350.
- Cash is an asset and there is a decrease in the value of an asset. Hence, credit the cash by $350.
Prepare journal entry to record billing customers for the service provided.
Date | Account Titles and Explanations | Debit ($) | Credit ($) |
April 21 | 3,500 | ||
Cleaning fees earned | 3,500 | ||
(To record services rendered on account) |
(Table 7)
- Accounts receivable is an asset and there is an increase in the value of asset. Hence, debit the accounts receivable by $3,500.
- Cleaning fees earned is a component of stockholder’s equity and there is an increase in the value of revenue. Hence, credit the cleaning fees earned by $3,500.
Prepare journal entry to record payment of $3,000 for cleaning equipment.
Date | Account Titles and Explanations | Debit ($) | Credit ($) |
April 23 | Accounts payable | 3,000 | |
Cash | 3,000 | ||
(To record cash paid for purchase of cleaning equipment on account) |
(Table 8)
- Accounts payable is a liability and there is a decrease in the value of a liability. Hence, debit the accounts payable by $3,000.
- Cash is an asset and there is a decrease in the value of an asset. Hence, credit the cash by $3,000.
Prepare journal entry to record collection of cash from the customers on account.
Date | Account Titles and Explanations | Debit ($) | Credit ($) |
April 28 | Cash | 2,300 | |
Accounts receivable | 2,300 | ||
(To record amount collected from customers) |
(Table 9)
- Cash is an asset and there is an increase in the value of an asset. Hence, debit the cash by $2,300.
- Accounts receivable is an asset and there is a decrease in the value of an asset. Hence, credit the accounts receivable by $2,300.
Prepare journal entry to record cash dividend of $1,000 received by Person R.
Date | Account Titles and Explanations | Debit ($) | Credit ($) |
April 29 | Cash | 1,000 | |
Dividend | 1,000 | ||
(To record dividends received) |
(Table 10)
- Cash is an asset and there is an increase in the value of an asset. Hence, debit the cash by $1,000.
- Dividend is a component of stockholder’s equity and there is an increase in the value of equity. Hence, credit the dividend by $1,000.
Prepare journal entry to record payment of wages.
Date | Account Titles and Explanations | Debit ($) | Credit ($) |
April 30 | Wages expense | 1,750 | |
Cash | 1,750 | ||
(To record dividends received) |
(Table 11)
- Wages expense is a component of stockholder’s equity and there is an increase the value of expense. Hence, debit the wages expense by $1,750.
- Cash is an asset and there is a decrease in the value of an asset. Hence, credit the cash by $1,750.
Prepare journal entry to record payment made to service station for the gasoline used during April.
Date | Account Titles and Explanations | Debit ($) | Credit ($) |
April 30 | Fuel expense | 95 | |
Cash | 95 | ||
(To record wage expense payment ) |
(Table 12)
- Wages expense is a component of stockholder’s equity and there is an increase in the value of expense. Hence, debit the wages expense by $95.
- Cash is an asset and there is a decrease in the value of an asset. Hence, credit the cash by $95.
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Chapter 2 Solutions
Financial Accounting for Undergraduates
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