Chapter 2, Problem 7PB

1.

To determine

Prepare the journal entry to record the transaction of S Car Cleaning for the month of June.

Explanation of Solution

Journal entry:

Journal entry is a set of economic events which can be measured in monetary terms. These are recorded chronologically and systematically.

Accounting rules for Journal entries:

• To record increase balance of account: Debit assets, expenses, losses and credit liabilities, capital, revenue and gains.
• To record decrease balance of account: Credit assets, expenses, losses and debit liabilities, capital, revenue and gains.

Journalize the transactions of S Car Cleaning for the month of June.

Date	Account Title and Explanation	Debit($)	Credit($)
June 1	Cash	70,000
	Notes Payable		70,000
	(To record obtain of loan from the bank.)
June 2	Cash	40,000
	Common Stock		40,000
	(To record common stock purchased for cash.)
June 7	Equipment	75,000
	Cash		75,000
	(To record purchase of equipment.)
June 10	Supplies	8,000
	Accounts Payable		8,000
	(To record purchase of supplies on account)
June 12	Cash	5,000
	Service revenue		5,000
	(To record the payment received for the altered dresses.)
June 16	Salary Expense	900
	Cash		900
	(To record the salary payment made.)
June 19	Advertising Expense	500
	Cash		500
	(To record the advertising payment made)
June 23	Accounts receivable	6,000
	Service Revenue		6,000
	(To record receipt of payment for car washes were due ion account.)
June 29	Salaries Expense	950
	Cash		950
	(To record salary expense payment)
June 30	Utilities Expense	1,400
	Cash		1,400
	(To record utility expense payment.)
June 30	Dividends	600
	Cash		600
	(To record the payment of Dividends made to the stockholders.)

Table (1)

2. and 3.

To determine

Calculate the balance of each account by posting each transaction to the T-accounts.

Explanation of Solution

T-account:

An account is referred to as a T-account, because the alignment of the components of the account resembles the capital letter ‘T’. An account consists of the three main components which are as follows:

• The title of the account
• The left or debit side
• The right or credit side

Post the journal entries into T-accounts and determine the balance of each account.

Cash Account

Cash
Date	Details	Debit ($)		Date	Details	Credit ($)
June 1	Notes payable	70,000		June 7	Equipment	75,000
June 2	Common stock	40,000		June 16	Salaries expense	900
June 12	Service Revenue	5,000		June 19	Advertising expense	500
				June 29	Salaries expense	950
				June 30	Utilities expense	1,400
				June 30	Dividends	600
				June 30	Balance c/d	35,650
		115,000				115,000
July 1	Balance b/d	35,650

Table (2)

Common Stock Account

Common Stock
Date	Details	Debit ($)		Date	Details	Credit ($)
June 30	Balance c/d	40,000		June 2	Cash	40,000
	Total	40,000			Total	40,000
				July 1	Balance b/d	40,000

Table (3)

Accounts Receivable Account

Accounts Receivable
Date	Details	Debit ($)		Date	Details	Credit ($)
June 23	Service Revenue	6,000		June 30	Balance c/d	6,000
	Total	6,000			Total	6,000
July 1	Balance b/d	6,000

Table (4)

Equipment Account

Equipment
Date	Details	Debit ($)		Date	Details	Credit ($)
June 7	Cash	75,000		March 31	Balance c/d	75,000
	Total	75,000			Total	75,000
July 1	Balance b/d	75,000

Table (5)

Supplies Account

Supplies
Date	Details	Debit ($)		Date	Details	Credit ($)
June 10	Accounts payable	8,000		June 30	Balance c/d	8,000
	Total	8,000			Total	8,000
July 1	Balance b/d	8,000

Table (6)

Accounts Payable Account

Accounts Payable
Date	Details	Debit ($)		Date	Details	Credit ($)
June 30	Balance c/d	8,000		June 10	Supplies	8,000
	Total	8,000			Total	8,000
				July 1	Balance b/d	8,000

Table (7)

Service Revenue Account

Service Revenue
Date	Details	Debit ($)		Date	Details	Credit ($)
June 30	Balance c/d	11,000		June 12	Cash	5,000
				June 23	Accounts Receivable	6,000
	Total	11,000			Total	11,000
				July 1	Balance b/d	11,000

Table (8)

Notes Payable Account

Notes Payable
Date	Details	Debit ($)		Date	Details	Credit ($)
June 30	Balance c/d	2,700		June 7	Equipment	2,700
	Total	2,700			Total	2,700
				July 1	Balance b/d	2,700

Table (9)

Salary Expense Account

Salary Expense
Date	Details	Debit ($)		Date	Details	Credit ($)
June 16	Cash	900		June 30	Balance c/d	1,850
June 29	Cash	950
	Total	1,850			Total	1,850
July 1	Balance b/d	1,850

Table (10)

Advertising Expense Account

Advertising Expense
Date	Details	Debit ($)		Date	Details	Credit ($)
June 19	Cash	500		June 30	Balance c/d	500
	Total	500			Total	500
	Balance b/d	500

Table (11)

Utility Expense Account

Utility Expense
Date	Details	Debit ($)		Date	Details	Credit ($)
June 30	Cash	1,400		June 30	Balance c/d	1,400
	Total	1,400			Total	1,400
July 1	Balance b/d	1,400

Table (12)

Dividends Account

Dividends
Date	Details	Debit ($)		Date	Details	Credit ($)
June 30	Cash	600		June 30	Balance c/d	600
	Total	600			Total	600
July 1	Balance b/d	600

Table (13)

4.

To determine

Prepare a trial balance as of June.

Explanation of Solution

Trial balance:

A trial balance is the summary of all the ledger accounts. Debit balances are listed in left column and credit balances are listed in right column of the trial balance. The totals of debit and credit column should be equal. The trial balance is usually prepared to check the accuracy of ledger accounts balances, before the preparation of financial statements.

Prepare the trial balance of S Car Cleaning for the month of June.

S Car Cleaning Trial Balance June 30
Account Titles	Debit ($)	Credit ($)
Cash	33,650
Accounts receivable	6,000
Supplies	8,000
Equipment	75,000
Accounts payable		8,000
Notes payable		70,000
Common stock		40,000
Dividends	600
Service revenue		11,000
Salaries expense	1,850
Advertising expense	500
Utilities expense	1,400
Total	129,000	129,000

Table (14)

Conclusion

Hence, the trial balance is prepared, and the debit column and credit column of the trial balance are agreed, both having balance of $129,000.