Chapter 2, Problem 7GLP

To determine

Journal Entry:

Journal entry is a medium of recording the business transactions carried during a particular accounting period.

Four Column Accounts:

The four column accounts keeps track of the balance as transactions takes place. In case of assets and expense accounts, the increase in the expenses and assets are shown in the debit column and vice-versa. When there is increase in liabilities and revenues, it is shown on the credit side and vice-versa.

Income Statement:

The statement which shows the revenues earned and expenses incurred during a particular year is called Income statement.

Statement of Owner’s Equity:

Statement of owner’s equity is concerned with portion of owner’s equity.

Balance Sheet:

A financial statement which shows the financial position of a company during specified accounting period is called a balance sheet.

To determine:

Prepare journal entries to record the transactions, create financial statements, and assess the impact of each transaction on financial statements.

Answer to Problem 7GLP

Solution:

Date	Accounts	Debit	Credit
a.	Cash	$60,000
	Office Equipment	$25,000
	H. Venedict, Capital		$85,000
b.	Land	$40,000
	Building	$160,000
	Cash		$30,000
	Note Payable		$170,000
c.	Office Supplies	$2,000
	Accounts Payable		$2,000
d.	Automobiles	$16,500
	H. Venedict, Capital		$16,500
e.	Office Equipment	$5,600
	Accounts Payable		$5,600
f.	Salaries Expense	$1,800
	Cash		$1,800
g.	Cash	$8,000
	Fees Earned		$8,000
h.	Utilities Expense	$635
	Cash		$635
i.	Accounts Payable	$2,000
	Cash		$2,000
j.	Office Equipment	$20,300
	Cash		$20,300
k.	Accounts Receivable	$6,250
	Fees Earned		$6,250
l.	Salaries Expense	$1,800
	Cash		$1,800
m.	Cash	$4,000
	Accounts Receivable		$4,000
n.	H. Venedict, Withdrawals	$2,800
	Cash		$2,800

HV CONSULTING Income Statement Month Ended September 30.
Revenues:
Fees Earned		$14,250
Expenses:
Salaries Expense	$3,600
Utilities Expense	$635
Total Expense		$4,235
Net Income		$10,015

HV CONSULTING Statement of Owner’s Equity Month Ended September 30
H. Venedict, Capital, Sept. 1	$0
Owner’s contribution during the month	$101,500
Net income for the month	$10,015
Subtotal	$111,515
Owner’s withdrawal	(2,800)
H. Venedict, Capital, Sept. 30.	$108,715

HV CONSULTING Balance Sheet Month Ended September 30.
Assets
Current Asset:
Cash	$12,665
Accounts Receivable	$2,250
Office Supplies	$2,000
Total Current Assets	$16,915
Plant, Property and Equipment
Office Equipment	$50,900
Automobiles	$16,500
Building	$160,000
Land	$40,000
Total Plant, Property and Equipment	$267,400
Total Assets	$284,315
Liabilities
Current Liabilities
Accounts Payable	$5,600
Long-Term Liabilities
Notes Payable	$170,000
Total Liabilities	$175,600
Owner’s Equity
H. Venedict, Capital	$108,715
Total Liabilities and Owner’s Equity	$284,315

Transactions	Impact on financial statements
a.	The contribution of cash and office equipment by the owner increases the assets and equity of the owner simultaneously.
b.	The land purchased by the company is debited as it increases assets and the cash account and note payable account are credited as it results in decrease of cash and increase of liabilities.
c.	Purchase of office supplies on credit increases the office supplies which is an asset and increases the accounts payable which is a liability.
d.	Investment of personal automobile in the company increases both assets “Automobile” and owner’s equity at the same time.
e.	Purchase of additional office equipment on credit increases the assets “Office Equipment” and liabilities “Accounts Payable” at the same time.
f.	Salaries expense incurred increases the expenses in the income statement and decreases the assets of cash accounts as it results in outflow of cash.
g.	Services performed for the client for cash will increase the cash balance and revenue in the income statement of the company.
h.	Utilities expense increases the expense and ultimately decreases the net income and cash balance at the same time.
i.	Payment on accounts payable decreases the cash balance and liabilities “Accounts Payable” of the company.
j.	Purchase of new office equipment for cash increases the assets “Office Equipment” and decreases the cash balance of the company by same amount.
k.	Service performed on credit increases the “Accounts Receivable” which is an asset and “Fees Earned” which is revenue by the same amount.
l.	Salary expense decreases the net income and cash balance of the company.
m.	Received cash on accounts receivable increases the cash balance and decreases the Accounts Receivable at the same time.
n.	Withdrawal by the owner will result in decrease of equity and cash balance of the company.

Explanation of Solution

Explanation:

Cash Account no. 101
Date	Debit	Credit	Balance
a.	$60,000		$60,000
b.		$30,000	$30,000
f.		$1,800	$28,200
g.	$8,000		$36,200
h.		$635	$35,835
i.		$2,000	$33,835
j.		$20,300	$13,535
l.		$1,800	$11,735
m.	$4,000		$15,735
n.		$2,800	$12,665

Accounts Receivable Account no. 106
Date	Debit	Credit	Balance
k.	$6,250		$6,250
m.		$4,000	$2,250

Office Supplies Account no. 108
Date	Debit	Credit	Balance
c.	$2,000		$2,000

Office Equipment Account no. 163
Date	Debit	Credit	Balance
a.	$25,000		$25,000
e.	$5,600		$30,600
j.	$20,300		$50,900

Automobiles Account no. 164
Date	Debit	Credit	Balance
d.	$16,500		$16,500

Building Account no. 170
Date	Debit	Credit	Balance
b.	$160,000		$160,000

Land Account no. 172
Date	Debit	Credit	Balance
b.	$40,000		$40,000

Accounts Payable Account no. 201
Date	Debit	Credit	Balance
c.		$2,000	$2,000
e.		$5,600	$7,600
i.	$2,000		$5,600

Notes Payable Account no. 250
Date	Debit	Credit	Balance
b.		$170,000	$170,000

H. Venedict, Capital Account no. 301
Date	Debit	Credit	Balance
a.		$85,000	$85,000
d.		$16,500	$101,500

H. Venedict, Withdrawals Account no. 302
Date	Debit	Credit	Balance
n.	$2,800		$2,800

Fees Earned Account no. 402
Date	Debit	Credit	Balance
g.		$8,000	$8,000
k.		$6,250	$14,250

Salaries Expense Account no. 601
Date	Debit	Credit	Balance
f.	$1,800		$1,800
l.	$1,800		$3,600

Utilities Expense Account no. 602
Date	Debit	Credit	Balance
h.	$635		$635

Conclusion

Conclusion:

The net income of HV consulting for the month ended September 30 is $10,015 and total assets, liabilities and owners’ equity amounts to $284,315.