Chapter 2, Problem 6BE

To determine

Prepare journal entry to record the given transactions.

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 $11,500 invested by the Person R to begin the business.

Date	Account Titles and Explanations	Debit ($)	Credit ($)
April 1	Cash	11,500
	Common Stock		11,500
	(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 $11,500.
• 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 $11,500.

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 $3,500 down with the remainder due within 30 days.

Date	Account Titles and Explanations	Debit ($)	Credit ($)
April 3	Equipment	5,500
	Cash		3,500
	Accounts payable		2,000
	(To record purchase of cleaning equipment)

(Table 4)

• Office equipment is an asset and there is an increase in the value of an asset. Hence, debit the office equipment by $5,500.
• Cash is an asset and there is a decrease in the value of an asset. Hence, credit the cash by $3,500.
• Accounts payable is a liability and there is an increase in the value of a liability. Hence, credit the accounts payable by $2,000.

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	Accounts receivable	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 $1,500 for cleaning equipment.

Date	Account Titles and Explanations	Debit ($)	Credit ($)
April 23	Accounts payable	1,500
	Cash		1,500
	(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 $1,500.
• Cash is an asset and there is a decrease in the value of an asset. Hence, credit the cash by $1,500.

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	255
	Cash		255
	(To record wage expense payment )

(Table 12)

• Wages expense is a component of stockholder’s equity and there is an increase the value of expense. Hence, debit the wages expense by $255.
• Cash is an asset and there is a decrease in the value of an asset. Hence, credit the cash by $255.