Chapter 3, Problem 3.17E

(a)

To determine

Journal:

Journal is the book of original entry. Journal consists of the day-to-day financial transactions in a chronological order. The journal has two aspects; they are debit aspect and the credit aspect.

Rules of debit and credit:

“An increase in an asset account, an increase in an expense account, a decrease in liability account, and a decrease in a revenue account should be debited.

Similarly, an increase in liability account, an increase in a revenue account and a decrease in an asset account, a decrease in an expenses account should be credited”.

Trial balance:

A trial balance is the summary of all the ledger accounts. The trial balance is prepared to check the total balance of the debit with the total of the balance of the credit column, which must be equal. The trial balance is usually prepared to check accuracy of ledger balances. In trial balance the debit balances are listed in the left column, and credit balances are listed in the right column.

T-Accounts:

T-accounts are referred as T-account because its format represents the letter “T”. The T-accounts consists of the following:

• The title of accounts.
• The debit side (Dr) and,
• The credit side (Cr).

To journalize: The transactions that occurred on October 1, 10, and 20.

Answer to Problem 3.17E

Prepare journal entries for the transactions that occurred on October 1, 10, and 20.

Date	Account Title and Explanation	Debit ($)	Credit ($)
October. 1	Cash	7,000
	Common stock		7,000
	(To record the issuance of common stock )
October. 10	Cash	980
	Service revenue		980
	(To record the cash received for the service performed )
October. 10	Cash	8,000
	Notes payable		8,000
	(To record the cash borrowed by signing a notes )
October. 20	Cash	8,000
	Accounts receivable		8,000
	(To record the cash received for the payment made on account )
October. 20	Accounts receivable	920
	Service revenue		920
	(To record the service performed on account)

Table (1)

Explanation of Solution

1. 1.) Cash is an asset and increased, hence debit cash for $7,000. Common stock is a component of stockholders’ equity and increased, hence credit common stock for $7,000.
2. 2.) Cash is an asset and increased, hence debit cash for $980. Service revenue is a component of stockholder’s equity account and increased, hence credit service revenue for $980.
3. 3.) Cash is an asset and increased, hence debit cash for $8,000. Notes payable is a liability and increased, hence credit notes payable for $8,000.
4. 4.) Cash is an asset and increased, hence debit cash for $8,000. Accounts receivable is an asset and decreased, hence credit accounts receivable for $8,000.
5. 5.) Accounts receivable is an asset and increased, hence debit accounts receivable for $920. Service revenue is a component of stockholder’s equity account and increased, hence credit service revenue for $920.

(b)

(1)

To determine

To Compute: The ending balance of T accounts.

Explanation of Solution

The ending balances of T-accounts are as follows:

Cash
Oct.        1	$ 7,000	Oct.     4	$400
10	$    980	12	$1,500
10	$ 8,000	15	$250
20	$    700	30	300
25	$ 2,000	31	500
Total	$ 18,680	Total	2,750
Bal.	$ 15,730

Table (1)

Accounts Receivable
Oct.    6	$     800	Oct.   20	$   700
20	$     920
Total	$  1,720
Bal.	$  1,020

Table (2)

Supplies
Oct.     4	$  400	Oct.    31	$   180
Bal.	$  220

Table (3)

Accounts Payable
Oct.12	$  1,500	Oct. 3	$3,000
		Bal.	$ 1,500

Table (4)

Common Stock
		Oct.    1	$ 7,000
		Oct.   25	$  2,000
		Bal.	$  9,000

Table (5)

Equipment
Oct.     3	$3,000
Bal.	$3,000

Table (6)

Notes Payable
		Oct.   10	$8,000
		Bal.	$8,000

Table (7)

Service Revenue
		Oct.     6	$ 800
		Oct.   10	$ 980
		Oct.   20	$  920
		Bal.	$  2,700

Table (8)

Rent Expenses
Oct.   31	$  250
Bal.	$  250

Table (9)

Salaries and wages expenses
Oct.   31	$  500
Bal.	$  500

Table (10)

Supplies Expenses
Oct.   31	$  180
Bal.	$  180

Table (11)

Dividend
Oct.   30	$  300
Bal.	$  300

Table (12)

(2)

To determine

To prepare: The trial balance of K Company as on October 31, 2017.

Explanation of Solution

Prepare the trial balance of K Company as on October 31, 2017 as follows:

Corporation K
Trial balance
October 31, 2017
	Debit ($)	Credit ($)
Cash	15,730
Common Stock		9,000
Equipment	3,000
Supplies	220
Accounts Receivables	1,020
Accounts Payable		1,500
Notes Payable		8,000
Dividends	300
Supplies Expenses	180
Salaries and wages Expenses	500
Service Revenue		2,700
Rent Expenses	250
Total balance	$21,200	$21,200

Table (1)

Conclusion

The debit column and credit column of the trial balance are agreed, both having balance of $21,200.