Chapter 2, Problem 8GLP

Using transactions from the following assignments, record journal entries, create financial statements, and assess the impact of each transaction on financial statements.

Based on Serial Problem SP 2

On October 1, 2018, Santana Rey launched a computer services company called Business Solutions, which provides consulting services, computer system installations, and custom program development. Rey adopts the calendar year for reporting purposes and expects to prepare the company’s first set of financial statements on December 31, 2018. The company’s initial chart of accounts follows.

Required

1. Prepare journal entries to record each of the following transactions for Business Solutions.

Oct.

1

S. Rey invested $45,000 cash, a $20,000 computer system, and $8,000 of office equipment in the company in exchange for its common stock.

2

The company paid $3,300 cash for four months’ rent. (Hint: Debit Prepaid Rent for $3,300.)

3

The company purchased $1,420 of computer supplies on credit from Harris Office Products.

5

The company paid $2,220 cash for one year’s premium on a property and liability insurance policy. (Hint: Debit Prepaid Insurance for $2,220.)

6

The company billed Easy Leasing $4,800 for services performed in installing a new web server.

8

The company paid $1,420 cash for the computer supplies purchased from Harris Office Products on October 3.

10

The company hired Lyn Addie as a part−time assistant for $125 per day, as needed.

12

The company billed Easy Leasing another $1,400 for services performed.

15

The company received $4,800 cash from Easy Leasing as partial payment on its account.

17

The company paid $805 cash to repair computer equipment that was damaged when moving it.

20

The company paid $1,728 cash for advertisements published in the local newspaper.

22

The company received $1,400 cash from Easy Leasing on its account.

28

The company billed IFM Company $5,208 for services performed.

31

The company paid $875 cash for Lyn Addie’s wages for seven days’ work.

31

The company paid $3,600 cash in dividends.

Nov.

1

The company reimbursed S. Rey in cash for business automobile mileage allowance (Rey logged 1,000 miles at $0.32 per mile).

2

The company received $4,633 cash from Liu Corporation for computer services performed.

5

The company purchased computer supplies for $1,125 cash from Harris Office Products.

8

The company billed Gomez Co. $5,668 for services performed.

13

The company received notification from Alex’s Engineering Co. that Business Solutions’s bid of $3,950 for an upcoming project was accepted.

18

The company received $2,208 cash from IFM Company as partial payment of the October 28 bill.

22

The company donated $250 cash to the United Way in the company’s name.

24

The company completed work and sent a bill for $3,950 to Alex’s Engineering Co.

25

The company sent another bill to IFM Company for the past−due amount of $3,000.

28

The company reimbursed S. Rey in cash for business automobile mileage (1,200 miles at $0.32 per mile).

30

The company paid $1,750 cash for Lyn Addie’s wages for 14 days’ work.

30

The company paid $2,000 cash in dividends.

Open ledger accounts (in balance column format) and post the journal entries from part 1 to them.

Prepare a trial balance as of the end of November.

Summary Introduction

Introduction: Journal entry is a technique of booking and recording financial transactions on any company. Ledger is used to record all economic transactions of the account by account type, with debits and credits in separate columns and a beginning monetary balance and ending monetary balance for each account.

To prepare: The general journal entries for the following transaction.

Explanation of Solution

Journal entries of KT for the month of April are shown below.

Date	Particular	PR	Dr.	Cr.
Oct 1	Cash		20,000
	Office equipment		45,000
	Computer equipment		8,000
	To Common stock			73,000
	(Owner’s investment)
2 Oct	Prepaid rent		3,300
	cash			3,300
	(rent paid in advance)
3 Oct	Computer supplies		1,420
	Account payable company H			1,420
	(purchase of supplies on credit from company H)
5 Oct	Prepaid insurance		2,220
	Cash			2,220
	(payment of insurance)
6 Oct	Account receivable company E		4,800
	Service revenue			4,800
	(service provided on credit)
8 Oct	Account payable company H		1,420
	Cash			1,420
	(cash to company H)
12 Oct	Account receivable company E		1,400
	Service revenue			1,400
	(service provided on credit)
15 Oct	Cash		4,800
	Account receivable company E			4,800
	(cash received from company E)
17 Oct	Repair computer equipment		805
	Cash			805
	(cash paid for repair of computer equipment)
20 Oct	Advertisement		1,728
	Cash			1,728
	(cash paid for advertisement )
22 Oct	Cash		1,400
	Account receivable company E			1,400
	(cash received from company E)
28 Oct	Account receivable		5,208
	Service revenue			5,208
31 Oct	Wages expense		875
	Cash			875
	(Cash paid for wages)
31 Oct	Dividend cash		3600
	(dividend paid in cash)			3600
1 Nov	Miscellaneous expense		320
	Cash			320
	(cash paid for miscellaneous expense)
2 Nov	Cash		4,633
	Service revenue			4,633
	(cash received for provided revenue)
5 Nov	Computer supplies		1,125
	Cash			1125
	(purchase of computer supplies on cash)
8 Nov	Account receivable Company G		5,668
	Service revenue			5,668
	(service provided on credit)
18 Nov	Cash		2,208
	Account receivable company I			2,208
	(cash received from company I)
22 Nov	Donation		250
	Cash			250
	(cash given as donation)
24 Nov	Account receivable Company A		3950
	Computer service revenue			3950
	(to record service revenue)
28 Nov	Miscellaneous expense		384
	Cash			384
	(cash paid for miscellaneous expense)
30 Nov	Wages expense		1750
	Cash			1750
	(cash paid for wages)
30 Nov	Dividend		2000
	Cash			2000
	(Dividend paid)

Summary Introduction

Introduction: Journal entry is a technique of booking and recording financial transactions on any company. Ledger is used to record all economic transactions of the account by account type, with debits and credits in separate columns and a beginning monetary balance and ending monetary balance for each account.

To prepare: T account for the following transactions.

Explanation of Solution

Cash Account No.101
Date	PR	Debit	Credit	Balance
1 Oct		45000		45,000
2 Oct			3300	41,700
3 Oct			2220	39,480
5 Oct			1420	38,060
6 Oct		4800		42,860
8 Oct			875	41,985
12 Oct			805	41,180
15 Oct			1728	39,452
17 Oct		1400		40,850
20 Oct			3600	37,252
22 Oct			320	36,932
28 Oct		4633		41,565
31 Oct			1125	40,440
31 Oct		2208		42,648
15 Nov			250	42,398
1 Nov			3841	42,014
2 Nov			1750	40,264
30 Nov			2000	38,264

Accounts Receivable company E				Account no. 106
Date	PR	Debit	Credit	Balance
6 Oct		4800		4800
12 Oct		1400		6200
15 Oct			4800	1400
22 Oct			1400	0

Account receivable company E				Account no.108
Date	PR	Debit	Credit	Balance
8 Oct		5668		5668

Account receivable company I				Account no. 108
Date	PR	Debit	Credit	Balance
6 Oct		5208		5208
15 Oct			2208	3000

Account payable				Account no.201
Date	PR	Debit	Credit	Balance
6 Oct			1420	1420
15 Oct		1420		0
Supplies				Account no. 126
Date	PR	Debit	Credit	Balance
3 Oct		1420		1420
5 Nov			1125	2545
Equipment				Account no. 163
Date	PR	Debit	Credit	Balance
1 Oct		8000		8000

Prepaid insurance				Account no.128
Date	PR	Debit	Credit	Balance
2 oct		2220		2220

Prepaid rent				Account no. 131
Date	PR	Debit	Credit	Balance
1 oct		3300		3300

Computer supplies				Account no. 167
Date	PR	Debit	Credit	Balance
1 Oct		20000		20000

Common stock				Account no. 307
Date	PR	Debit	Credit	Balance
1 oct			45000	45000
1 Oct			20000	65000
1 Oct			8000	73000

Dividend				Account no. 319
Date	PR	Debit	Credit	Balance
31 oct		2000		2000
31 oct		3600		5600

Computer Service revenue				Account no. 403
Date	PR	Debit	Credit	Balance
24 Nov			3950	3950
6 Oct			4800	8750
12 Oct			1400	10150
28 Oct			5208	15358
8 Nov			5668	21026

Summary Introduction

Introduction: Journal entry is a technique of booking and recording financial transactions on any company. Ledger is used to record all economic transactions of the account by account type, with debits and credits in separate columns and a beginning monetary balance and ending monetary balance for each account.

To prepare: Trail balance.

Answer to Problem 8GLP

Total of trail balance is $98,659

Explanation of Solution

S Trail balance
Particular	Dr.	Cr.
Cash	38,264
Account receivable	12,618
Equipment	8,000
Supplies	2,545
Prepaid insurance	2,220
Prepaid rent	3,300
Account payable		0
Wages expense	2,625
Common stock		73,000
Divided	5,600
Service revenue		21,709
Computer service revenue		3950
Donation	250
Computer equipment	20,000
Repair expense	805
Advertisement	1728
Mileage expense	320
Miscellaneous expense	384
Total	98,659	98,659