Chapter 4, Problem 19E

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) accounting equation effects, (3) journal entries, and (4) T-accounts to complete a four-part table similar to the following. Prepare a separate table for each item (a)–(f) listed below.

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.

To determine

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)

To determine

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)

To determine

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)

To determine

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)

To determine

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)

To determine

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)