Explanation 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: Debit , all increase in assets, expenses and dividends, all decrease in liabilities, revenues and stockholders’ equities. Credit , all increase in liabilities, revenues, and stockholders’ equities, all decrease in assets, expenses. Journal entries of Company D are as follows: a. Cash borrowed from bank: Date Accounts title and explanation Ref. Debit ($) Credit ($) Cash (+A) 30,000 Notes payable (+L) 30,000 (To record cash borrowed from bank) Table (1) Cash is an assets account and it increased the value of asset by $30,000. Hence, debit the cash account for $30,000. Notes payable is a liability account, and it increased the value of liabilities by $30,000. Hence, credit the notes payable for $30,000. b. Cash paid to employee on notes: Date Accounts title and explanation Ref. Debit ($) Credit ($) Notes receivable (+A) 10,000 Cash (-A) 10,000 (To record cash paid to an employee on note) Table (2) Notes receivable is an assets account and it increased the value of asset by $10,000. Hence, debit the notes receivable account for $10,000. Cash is an assets account and it decreased the value of asset by $10,000. Hence, credit the cash account for $10,000. c. Issuance of common stock: Date Accounts title and explanation Ref. Debit ($) Credit ($) Cash (+A) 500 Common stock (+SE) (1) 10 Additional paid-in capital (+SE) (2) 490 (To record the issuance of common stock) Table (2) Cash is an assets account and it increased the value of asset by $500. Hence, debit the cash account for $500. Common stock is a component of stockholder’s equity and it increased the value of stockholder’s equity by $10, Hence, credit the common stock for $10. Additional paid-in capital is a component of stockholder’s equity and it increased the value of stockholder’s equity by $490, Hence, credit the additional paid-in capital for $490...

8th Edition

ISBN: 9780078025556

Author: Robert Libby, Patricia Libby, Daniel Short

Publisher: McGraw-Hill Education

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Chapter 2 Solutions

Financial Accounting, 8th Edition

Ch. 2 - Prob. 1Q Ch. 2 - Define the following: a. Asset b. Current asset c....Ch. 2 - Prob. 3Q Ch. 2 - Why are accounting assumptions necessary?Ch. 2 - For accounting purposes, what is an account?...Ch. 2 - What is the fundamental accounting model?Ch. 2 - Prob. 7Q Ch. 2 - Explain what debit and credit mean.Ch. 2 - Prob. 9Q Ch. 2 - Prob. 10Q

Ch. 2 - Prob. 11Q Ch. 2 - Prob. 12Q Ch. 2 - How is the current ratio computed and interpreted?Ch. 2 - Prob. 14Q Ch. 2 - Prob. 1MCQ Ch. 2 - Which of the following is not an asset? a....Ch. 2 - Total liabilities on a balance sheet at the end of...Ch. 2 - The dual effects concept can best be described as...Ch. 2 - The T-account is a tool commonly used for...Ch. 2 - Prob. 6MCQ Ch. 2 - The Cash T-account has a beginning balance of...Ch. 2 - Prob. 8MCQ Ch. 2 - At the end of a recent year, The Gap, Inc.,...Ch. 2 - Prob. 10MCQ Ch. 2 - Prob. 1ME Ch. 2 - Matching Definitions with Terms Match each...Ch. 2 - Identifying Events as Accounting Transactions...Ch. 2 - Classifying Accounts on a Balance Sheet The...Ch. 2 - Prob. 5ME Ch. 2 - Prob. 6ME Ch. 2 - Prob. 7ME Ch. 2 - Prob. 8ME Ch. 2 - Prob. 9ME Ch. 2 - Prob. 10ME Ch. 2 - Prob. 11ME Ch. 2 - Prob. 12ME Ch. 2 - Prob. 13ME Ch. 2 - Prob. 1E Ch. 2 - Prob. 2E Ch. 2 - Prob. 3E Ch. 2 - Prob. 4E Ch. 2 - Determining Financial Statement Effects of Several...Ch. 2 - Prob. 6E Ch. 2 - Prob. 7E Ch. 2 - Analyzing the Effects of Transactions In...Ch. 2 - Prob. 9E Ch. 2 - Prob. 10E Ch. 2 - Prob. 11E Ch. 2 - Prob. 12E Ch. 2 - Prob. 13E Ch. 2 - Prob. 14E Ch. 2 - Prob. 15E Ch. 2 - Prob. 16E Ch. 2 - Inferring Typical Investing and Financing...Ch. 2 - Prob. 18E Ch. 2 - Prob. 19E Ch. 2 - Prob. 20E Ch. 2 - Identifying Accounts on a Classified Balance Sheet...Ch. 2 - Prob. 2P Ch. 2 - Prob. 3P Ch. 2 - Prob. 4P Ch. 2 - Prob. 5P Ch. 2 - Prob. 6P Ch. 2 - Prob. 1AP Ch. 2 - Prob. 2AP Ch. 2 - Prob. 3AP Ch. 2 - Prob. 4AP Ch. 2 - Prob. 1CP Ch. 2 - Prob. 2CP Ch. 2 - Prob. 3CP Ch. 2 - Prob. 4CP Ch. 2 - Prob. 5CP Ch. 2 - Prob. 6CP Ch. 2 - Prob. 7CP Ch. 2 - Prob. 8CP Ch. 2 - Prob. 1CC

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Record the journal entries of Company D.

Solution Summary: The author explains the rules for debiting and crediting different accounts while they occur in business transactions to abide by the double-entry system.

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