
Concept explainers
Analyzing, Recording, and Summarizing Business Activities and Adjustments
The following relates to a magazine company called My Style Mag (MSM). You will use your understanding of the relationships among (1) business activities, (2)
Required:
For each item (a)–(f) listed below, use the information provided to prepare and complete a four-part table similar to that shown above. Items (a)–(f) are independent of one another.
a.

Prepare a four part table by using the given information.
Explanation of Solution
Accounting equation: Accounting equation is an accounting tool expressed in the form of equation, by creating a relation between resources or assets of a business and claims on the resources by the creditors, and the owners.
Journal entry: Journal entry is a set of economic events which can be measured in monetary terms. These are recorded chronologically and systematically.
T-account: The condensed form of a ledger is referred to as T-account. The left-hand side of this account is known as debit, and the right hand side is known as credit.
Prepare a four part table by using the given information as follows:
(1) | On January 22, 2018, MSM received $24,000 cash from customers for one–year subscriptions to the magazine for February 2018 – January 2019. | ||||||||||
(2) | Assets | = | Liabilities | + | Stockholders’ Equity | ||||||
Cash +$24,000 |
Deferred Revenue +$24,000 | ||||||||||
(3) | Account Names | Debit ($) | Credit ($) | ||||||||
Cash (+A) | 24,000 | ||||||||||
Deferred revenue (+R, +SE) | 24,000 | ||||||||||
(To record the deferred revenue) | |||||||||||
(4) | Cash account | Deferred revenue account | |||||||||
$24,000 | $24,000 | ||||||||||
Table (1)
b.

Prepare a four part table by using the given information.
Explanation of Solution
Prepare a four part table by using the given information as follows:
(1) | Company MSM received utilities services on account at a cost of $3,000. | ||||||||||
(2) | Assets | = | Liabilities | + | Stockholders’ Equity | ||||||
Accounts payable +$3,000 | Utilities expense (+E) -$3,000 | ||||||||||
(3) | Account Names | Debit ($) | Credit ($) | ||||||||
Utilities expense(+E, -SE) | 3,000 | ||||||||||
Accounts payable (+L) | 3,000 | ||||||||||
(To record the utilities expense) | |||||||||||
(4) | Accounts payable account | Utilities expense account | |||||||||
$3,000 | $3,000 | ||||||||||
Table (2)
c.

Prepare a four part table by using the given information.
Explanation of Solution
Prepare a four part table by using the given information as follows:
(1) | Company MSM provided $2,000 of subscriptions for which it had been received the payment previously. | ||||||||||
(2) | Assets | = | Liabilities | + | Stockholders’ Equity | ||||||
Deferred Revenue -$2,000 | Subscription revenue (+R) +$2,000 | ||||||||||
(3) | Account Names | Debit ($) | Credit ($) | ||||||||
Deferred revenue (-L) | 2,000 | ||||||||||
Subscription Revenue (+R, +SE) | 2,000 | ||||||||||
(To record the subscription revenue) | |||||||||||
(4) | Deferred revenue account | Subscription revenue account | |||||||||
$2,000 | $2,000 | ||||||||||
Table (3)
d.

Prepare a four part table by using the given information.
Explanation of Solution
Prepare a four part table by using the given information as follows:
(1) | On March 31, 2018, Company MSM recorded an adjusting entry for the month’s depreciation of $10,000. | ||||||||||||
(2) | Assets | = | Liabilities | + | Stockholders’ Equity | ||||||||
Accumulated | Depreciation | ||||||||||||
Depreciation–Equipment (+xA) –$10,000 | Expense (+E) –$10,000 | ||||||||||||
(3) | Account Names | Debit ($) | Credit ($) | ||||||||||
Depreciation Expense (+E, –SE) | 10,000 | ||||||||||||
Accumulated Depreciation–Equipment (+xA, –A) | 10,000 | ||||||||||||
(To record accumulated depreciation) | |||||||||||||
(4) | Accumulated Depreciation–Equipment account | Depreciation Expense account | |||||||||||
$10,000 | $10,000 |
Table (4)
e.

Prepare a four part table by using the given information.
Explanation of Solution
Prepare a four part table by using the given information as follows:
(1) | On April 1, Company MSM paid $5,000 rent in advance of obtaining its benefits. | ||||||||||
(2) | Assets | = | Liabilities | + | Stockholders’ Equity | ||||||
Cash –$5,000 | |||||||||||
Prepaid Rent +$5,000 | |||||||||||
(3) | Account Names | Debit ($) | Credit($) | ||||||||
Prepaid Rent (+A) | 5,000 | ||||||||||
Cash (–A) | 5,000 | ||||||||||
(To record prepaid rent) | |||||||||||
(4) | Cash account | Prepaid Rent account | |||||||||
$5,000 | $5,000 | ||||||||||
Table (5)
f.

Prepare a four part table by using the given information.
Explanation of Solution
Prepare a four part table by using the given information as follows:
(1) | On April 30, 2018, Company MSM billed customers for $10,000 of advertising services provided on account. | |||||||||
(2) | Assets | = | Liabilities | + | Stockholders’ Equity | |||||
Accounts | Service | |||||||||
Receivable +$10,000 | Revenue (+R) +$10,000 | |||||||||
(3) | Account Names | Debit ($) | Credit ($) | |||||||
Accounts Receivable (+A) | 10,000 | |||||||||
Service Revenue (+R, +SE) | 10,000 | |||||||||
(To record service revenue recognized on account) | ||||||||||
(4) | Accounts Receivable account | Service Revenue account | ||||||||
$10,000 | $10,000 | |||||||||
Table (6)
Want to see more full solutions like this?
Chapter 4 Solutions
Fundamentals Of Financial Accounting
- The following data were selected from the records of Fluwars Company for the year ended December 31, current year: Balances at January 1, current year: Accounts receivable (various customers) $ 111,500 Allowance for doubtful accounts 11,200 The company sold merchandise for cash and on open account with credit terms 1/10, n/30, without a right of return. The following transactions occurred during the current year: Sold merchandise for cash, $252,000. Sold merchandise to Abbey Corp; invoice amount, $36,000. Sold merchandise to Brown Company; invoice amount, $47,600. Abbey paid the invoice in (b) within the discount period. Sold merchandise to Cavendish Inc.; invoice amount, $50,000. Collected $113,100 cash from customers for credit sales made during the year, all within the discount periods. Brown paid its account in full within the discount period. Sold merchandise to Decca Corporation; invoice amount, $42,400. Cavendish paid its account in full after the…arrow_forwardI want the correct answer with accountingarrow_forwardSolve with explanation and accounting questionarrow_forward
- Principles of Accounting Volume 1AccountingISBN:9781947172685Author:OpenStaxPublisher:OpenStax CollegeFinancial AccountingAccountingISBN:9781305088436Author:Carl Warren, Jim Reeve, Jonathan DuchacPublisher:Cengage LearningFinancial AccountingAccountingISBN:9781337272124Author:Carl Warren, James M. Reeve, Jonathan DuchacPublisher:Cengage Learning
- Financial Accounting: The Impact on Decision Make...AccountingISBN:9781305654174Author:Gary A. Porter, Curtis L. NortonPublisher:Cengage LearningPrinciples of Accounting Volume 2AccountingISBN:9781947172609Author:OpenStaxPublisher:OpenStax College


