Chapter 4, Problem 1BPSB

To determine

Concept introduction:

In accounting, journal entry refers to the posting of transaction into journal items. Such entry
comprises of either debit or credit transaction. The transaction posted in the journal entry can be rechecked because the debit side of the journal must be equivalent to the credit side of the journal.
Adjusted trial balance is prepared after all adjustments and thereafter Income statement, Statement of change in Owner’s equity and balance sheet is prepared.

Requirement 1:

To determine:

We have to determine the balance column format to open the ledger account.

Answer to Problem 1BPSB

Solution:

Ledger accounts

101 Cash account
date	debit	credit	Balance
			0

301 Capital account
date	debit	credit	Balance
			0

173 building account
date	debit	credit	Balance
			0

688 Telephone expense account
date	debit	credit	Balance
			0

684 Repair expense account
date	debit	credit	Balance
			0

622 Salaries expense account
date	debit	credit	Balance
			0

401 storage fee earned account
date	debit	credit	Balance
			0

128 Prepaid insurance account
date	debit	credit	Balance
			0

124Office supplies account
date	debit	credit	Balance
			0

640 Rent expense account
date	debit	credit	Balance
			0

606 depreciation expense-building
date	debit	credit	Balance
			0

174 accumulated depreciation-building
date	debit	credit	Balance
			0

106 accounts receivable
date	debit	credit	Balance
			0

901 income summary
date	debit	credit	Balance
			0

Explanation of Solution

Explanation:

All ledger account has been opened with the nil balance in balance column format i.e. first column is for date , second column is for debit and third is for credit column and final column is for balance column.

Requirement 2:

To determine

To determine:

We have to determine the journal entry and post them to the ledger account.

Answer to Problem 1BPSB

Solution:

DATE	Journal titles	Debit($)	Credit($)
July 01	Cash	30,000
	Building	150,000
	L.Plume capital		180,000
	(to record investment in cash and building)
July 02	Rent expense	2000
	cash		2000
	( to record rent payment)
July 05	Office supplies	2400
	Cash		2400
	( to record purchase of office supplies)
July 10	Prepaid insurance	7200
	cash		7200
	( to record insurance paid)
July 24	cash	9800
	Storage fee earned		9800
	( to record storage fee earned)
July 14	Salaries expense	1000
	Cash		1000
	( to record salary expense)
July 28	Salaries expense	1000
	Cash		1000
	( to record salary expense)
July 29	Repair expense	950
	cash		950
	( to record expense of repair)
July 30	Telephone expense	400
	cash		400
	( to record telephone expense)
July 30	L.Plume capital	2000
	cash		2000
	( to record withdrawal of cash for personal use)

Ledger accounts

Cash account
date	debit	credit	Balance
July 01		30,000	30,000
July 02	2000		28,000
July 05	2400		25,600
July 10	7200		18,400
July 14	1000		17,400
July 24		9800	27,200
July 28	1000		26,200
July 29	950		25,250
July 30	400		24,850
July 30	2000		22,850

Capital account
Date	debit	credit	Balance
July 1		180000	180,000

Building account
date	debit	credit	Balance
July 1	150,000		150,000

Telephone expense account
date	debit	credit	Balance
July 30	400		400

Repair expense account
date	debit	credit	Balance
July 29	950		950

Salaries expense account
date	debit	credit	Balance
July 14	1000		1000
July 28	1000		2000

Storage fee earned account
date	debit	credit	Balance
July 24		9800	9800

Prepaid insurance account
date	debit	credit	Balance
July 10	7200		7200

Office supplies account
date	debit	credit	Balance
July 5	2400		2400

Rent expense account
date	debit	credit	Balance
July 2	2000		2000

Explanation of Solution

Explanation:

1. In the given case, cash account and building account will be debited and capital account will be credited.
2. In the given case, rent expense account will be debited and cash account will be credited.
3. When office supplies is purchased then office supplies account will be debited and cash account will be credited.
4. In this case, prepaid insurance account will be debited and cash account will be credited.
5. In this case, salaries expense account will be debited and cash account will be credited.
6. When storage fee is earned then cash account will be debited and storage fee account will be credited.
7. When repair and telephone expense is incurred then repair account and telephone expense account will be debited and cash account will be credited.
8. Hen cash is withdrew then withdrawal account will be debited and cash account will be credited.

Requirement 3:

To determine

To determine:

We have to determine the unadjusted trial balance.

Answer to Problem 1BPSB

Solution:

Unadjusted trial balance July 30, 2015
Account title	Debit($)	Credit($)
101: cash	22,850
106: accounts receivable	0
124: office supplies	2,400
128: prepaid insurance	7,200
173: building	150,000
174: accumulated depreciation- building		0
209: salaries payable		0
301: L Plume capital		180,000
302: L Plume withdrawals	2,000
401: storage fee earned		9,800
606: depreciation expense-building	0
622: salaries expense	2000
637:insurance expense	0
640: rent expense	2000
650:office supplies expense	0
684: repair expense	950
688: telephone expense	400
Total	$189,800	$ 189,800

Explanation of Solution

Explanation:

Cash account				Cash account
date	debit	Credit	Balance	date	debit	credit	Balance
July 01		30,000	30,000	July 01		30,000	30,000
July 02	2000		28,000	July 02	1800		28,200
July 05	2400		25,600	July 03	1000		27,200
July 10	7200		18,400	July 10	2400		24,800
July 14	1000		17,400	July 14	1600		23,200
July 24		9800	27,200	July 24		8000	31,200
July 28	1000		26,200	July 28	1600		29,600
July 29	950		25,250	July 29	350		29,250
July 30	400		24,850	July 30	750		28,500
July 30	2000		22,850	July 30	1500		27,000

Capital account
Date	debit	Credit	Balance
July 1		180,000	180,000

Building account
date	debit	Credit	Balance
July 1	150,000		150000

Telephone expense account
date	Debit	Credit	Balance
July 30	400		400

Repair expense account
date	Debit	Credit	Balance
July 29	950		950

Salaries expense account
date	debit	Credit	Balance
July 14	1000		1000
July 28	1000		2000

Storage fee earned account
date	debit	Credit	Balance
July 24		9800	9800

Prepaid insurance account
date	debit	Credit	Balance
July 10	7200		7200

Requirement 4:

To determine

To determine:

We have to determine the adjusting entries for the given transaction.

Answer to Problem 1BPSB

Solution:

DATE	Journal titles	Debit($)	Credit($)
a.	Insurance expense	400
	Prepaid insurance		400
	( to record prepaid insurance)
b.	Office supplies expense	875
	Office supplies		875
	( to record office supply still available)
c.	Depreciation expense-building	1500
	Accumulated depreciation- building		1500
	( to record depreciation)
d.	Salaries expense	100
	Salaries payable		100
	( to record unrecorded salary)
e.	Accounts receivable	1,150
	Storage fee earned		1,150
	( to record storage fee earned)

Explanation of Solution

Explanation:

1. In the given case, insurance expense account will be debited and prepaid insurance account will be credited.
2. In this case, office supplies expenses account will be debited and office supplies will be credited.
3. When depreciation is to be provided then depreciation expense account will be debited and accumulated depreciation account will be credited.
4. In this case, salaries expense account will be debited and salaries payable account will be credited.
5. In the given case, accounts receivable account will be debited and storage fee earned account will be credited.

Requirement 5:

To determine

To determine:

We have to determine the adjusted trial balance, income statement and balance sheet.

Answer to Problem 1BPSB

Solution:

L.Plume Adjusted trial balance July 30, 2015
Account title	Debit($)	Credit($)
101: cash	22,850
106: accounts receivable	1150
124: office supplies	1525
128: prepaid insurance	6,800
167: building	150,000
174: accumulated depreciation- building		1500
209: salaries payable		100
301: L.Plume capital		180,000
302: L.Plume withdrawals	2,000
401: storage fee earned		10,950
606: depreciation expense-building	1500
622: salaries expense	2100
637:insurance expense	400
640: rent expense	2000
650:office supplies expense	875
684: repair expense	950
688: telephone expense	400
Total	$192,550	$192,550

L.Plume Travel Income statement For month ended July 30, 2015
Account title	amount($)	amount($)
Revenues:
Storage fee earned		10,950
Expenses:
Depreciation expense- building	1500
Salaries expense	2100
Insurance expense	400
Rent expense	2000
Office supplies expense	875
Telephone expenses	400
Repair expense	950
Total expenses		8225
Net income		$2,725

L.Plume Travel Balance sheet July 30, 2015
	amount($)	amount($)
Assets:
Cash		22,850
Accounts receivable		1,150
Office supplies		1525
Prepaid insurance		6800
Building	150,000
Accumulated depreciation	1500	148,500
Total assets		180,825
Liabilities
Salaries payable		100
Equity
L.Plume capital		180,725
Total liabilities and equity		$180,825

Explanation of Solution

Explanation:

Cash account				Cash account
date	debit	Credit	Balance	Date	Debit	Credit	Balance
July 01		30,000	30,000	July 1	30,000		30,000
July 02	2000		28,000	July 2		1800	28,200
July 05	2400		25,600	July 3		1000	27,200
July 10	7200		18,400	July 10		2,400	24,800
July 14	1000		17,400	July 14		1600	23,200
July 24		9800	27,200	July 24	8,000		31,200
July 28	1000		26,200	July 28		1600	29,600
July 29	950		25,250	July 29		350	29,250
July 30	400		24,850	July 30		750	28,500
July 30	2000		22,850	July 30		1500	27,000

Capital account
Date	Debit	Credit	Balance
July 1		180,000	180,000
July 30	2000		178000
July 30		2725	180,725

building account
Date	Debit	Credit	Balance
July 1	150,000		150,000

Telephone expense account
Date	Debit	Credit	Balance
July 30	400		400

Repair expense account
date	debit	Credit	Balance
July 29	950		950

Salaries expense account
date	debit	Credit	Balance
July 14	1000		1000
July 28	1000		2000
July 30	100		2100

Storage fee earned account
date	debit	Credit	Balance
July 24		9800	9800
July 30		1150	10,950

insurance account
date	debit	credit	Balance
July 30	400		400

Office supplies account
date	debit	credit	Balance
July 30	1525		1525

Rent expense account
date	debit	credit	Balance
July 2	2000		2000

Requirement 6:

To determine

To determine:

We have to determine the journal entries to close the temporary accounts.

Explanation of Solution

Explanation:

DATE	Journal titles	Debit($)	Credit($)
July 30	Storage fee earned	10,950
	Income summary		10,950
	( to record closing entry)
July 30	Income summary	8,225
	Depreciation expense		1500
	Salaries expense		2100
	Insurance expense		400
	Rent expense		2000
	Office supplies expense		875
	Repair expense		950
	Telephone expense		400
	( to record closing expenses)
July 30	Income summary	8225
	L.Plume capital		8225
	( to record closing capital)
July 30	L.Plume capital	2000
	j.nozomi withdrawals		2000
	( to record closing withdrawal)

Ledger accounts

Cash account				Cash account
date	debit	Credit	Balance	Date	Debit	Credit	Balance
July 01		30,000	30,000	July 1	30,000		30,000
July 02	2000		28,000	July 2		1800	28,200
July 05	2400		25,600	July 3		1000	27,200
July 10	7200		18,400	July 10		2,400	24,800
July 14	1000		17,400	July 14		1600	23,200
July 24		9800	27,200	July 24	8,000		31,200
July 28	1000		26,200	July 28		1600	29,600
July 29	950		25,250	July 29		350	29,250
July 30	400		24,850	July 30		750	28,500
July 30	2000		22,850	July 30		1500	27,000

Capital account
Date	Debit	Credit	Balance
July 1		180,000	180,000
July 30	2000		178000
July 30		2725	180,725

building account
Date	Debit	Credit	Balance
July 1	150,000		150,000

Telephone expense account
Date	Debit	Credit	Balance
July 30	400		400
July 30		400	0

Repair expense account
date	Debit	Credit	Balance
July 29	950		950
July 31		950	0

Salaries expense account
date	Debit	Credit	Balance
July 14	1000		1000
July 28	1000		2000
July 30	100		2100
July 31		2100	0

Storage fee earned account
date	Debit	Credit	Balance
July 24		9800	9800
July 30		1150	10,950
July 31	10950		Nil

insurance account
date	Debit	credit	Balance
July 30	400		400

Office supplies account
date	Debit	credit	Balance
July 30	1525		1525

Rent expense account
date	Debit	credit	Balance
July 2	2000		2000
July 31		2000	0

Income summary account
date	Debit	credit	balance
July 30		10950	10950
July 30	8225		2725
July 30	2725		0

Requirement 7:

To determine

To determine:

We have to determine the post closing trial balance.

Answer to Problem 1BPSB

Solution:

L.Plume Travel Post closing trial balance July 30, 2015
Account title	Debit($)	Credit($)
101: cash	22,850
106: accounts receivable	1150
124: office supplies	1525
128: prepaid insurance	6800
167: building	150000
168: accumulated depreciation- building		1500
209: salaries payable		100
301: L.Plume capital		180,725
Total	$182,325	$ 182,325

Explanation of Solution

Explanation:

Cash account				Cash account
date	debit	Credit	Balance	Date	Debit	Credit	Balance
July 01		30,000	30,000	July 1	30,000		30,000
July 02	2000		28,000	July 2		1800	28,200
July 05	2400		25,600	July 3		1000	27,200
July 10	7200		18,400	July 10		2,400	24,800
July 14	1000		17,400	July 14		1600	23,200
July 24		9800	27,200	July 24	8,000		31,200
July 28	1000		26,200	July 28		1600	29,600
July 29	950		25,250	July 29		350	29,250
July 30	400		24,850	July 30		750	28,500
July 30	2000		22,850	July 30		1500	27,000

Capital account
Date	Debit	Credit	Balance
July 1		180,000	180,000
July 30	2000		178000
July 30		2725	180,725

building account
Date	Debit	Credit	Balance
July 1	150,000		150,000