Chapter 3, Problem 3.5AP

(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.

To journalize: The business transactions as given for Company A.

Answer to Problem 3.5AP

Prepare journal entries of all the given transactions for Company A as follows:

Date	Account Title and Explanation	Debit ($)	Credit ($)
April. 1	Cash	18,000
	Common stock		18,000
	(To record the issuance of common stock )

Date	Account Title and Explanation	Debit ($)	Credit ($)
April. 1	No entry required.

Date	Account Title and Explanation	Debit ($)	Credit ($)
April. 2	Rent expenses	900
	Cash		900
	(To record the office rent paid for the month)

Date	Account Title and Explanation	Debit ($)	Credit ($)
April. 3	Supplies	1,300
	Account payable		1,300
	(To record the architectural supplies purchased on account)

Date	Account Title and Explanation	Debit ($)	Credit ($)
April. 10	Accounts receivable	1,900
	Service revenue		1,900
	(To record the services performed on account)

Date	Account Title and Explanation	Debit ($)	Credit ($)
April. 11	Cash	700
	Unearned service revenue		700
	(To record the cash earned for the service yet to provide.)

Date	Account Title and Explanation	Debit ($)	Credit ($)
April. 20	Cash	2,800
	Service revenue		2,800
	(To record the cash received for the service rendered)

Date	Account Title and Explanation	Debit ($)	Credit ($)
April. 30	Salaries expense	1,500
	Cash		1,500
	(To record the payment of  salaries to secretary – receptionist)

Date	Account Title and Explanation	Debit ($)	Credit ($)
April. 30	Accounts Payable	300
	Cash		300
	(To record the payment of cash on account)

Table (1)

Explanation of Solution

April. 1

• Cash is an asset and increased, hence debit cash for $18,000.
• Common stock is a component of stockholders’ equity and increased, hence credit common stock for $18,000.

April. 1

• This transaction does not have any effect on the accounting equation of the company since there is no change in the value of assets, liabilities and stockholder’s equity. Hence, no entry is required.

April. 2

• Rent expense is a component of stockholders’ equity and decreased, hence debit rent expenses for $900.
• Cash is an asset and decreased, hence credit cash for $900.

April. 3

• Supply is an asset and increased, hence debit supplies for $1,300.
• Account payable is a liability account and liabilities increased, hence credit account payable for $1,300.

April. 10

• Accounts receivable is an asset and increased, hence debit accounts receivable for $1,900.
• Service revenue is a component of stockholder’s equity account and increased, hence credit service revenue for $1,900.

April. 11

• Cash is an asset and increased, hence debit cash for $700.
• Unearned service revenue is a liability account and increased, hence credit unearned service revenue for $700.

April. 20

• Cash is an asset and increased, hence debit cash for $2,800.
• Service revenue is a component of stockholder’s equity account and increased, hence credit service revenue for $2,800.

April. 30

• Salaries expense is a component of stockholders’ equity and decreased, hence debit salaries expenses for $1,500
• Cash is an asset and decreased, hence credit cash for $1,500.

April. 30

• Account payable is a liability account and decreased, hence debit account payable for $300.
• Cash is an asset and decreased, hence credit cash for $300.

(b)

To determine

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 Post: The journal entries to the respective T accounts.

Explanation of Solution

The T-accounts for the following transaction are as follows:

Cash
Apr.       1	$18,000	Apr.    2	$900
11	$  700	30	$1,500
20	$ 2,800	30	$300
Total	$ 21,500	Total	2,700
Bal.	$ 18,800

Table (1)

Accounts Receivable
Apr.10	$  1,900
Bal.	$  1,900

Table (2)

Supplies
Apr. 3	$  1,300
Bal.	$  1,300

Table (3)

Accounts Payable
Apr.    30	$  300	Apr. 3	$1,300
		Bal.	$  1,000

Table (4)

Unearned Service Revenue
		Apr. 11	$  700
		Bal.	$  700

Table (5)

Common Stock
		Apr.1	$18,000
		Bal.	$18,000

Table (6)

Service Revenue
		Apr. 10	$ 1,900
		Apr. 20	$  2,800
		Bal.	$  4,700

Table (7)

Rent Expenses Account
Apr. 2	$  900
Bal.	$  900

Table (8)

Salaries and wages expenses
Apr. 30	$  1,500
Bal.	$  1,500

Table (9)

(c)

To determine

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

To Prepare: The trial balance of Company A as on April 30, 2017.

Explanation of Solution

Preparethe trial balance of Company A as on April.30, 2017 as follows:

Table (1)

Conclusion

The debit column and credit column of the trial balance are agreed, both having balance of $24,400.