Chapter 4, Problem 2CTP

1.

To determine

Journalize the given transaction and identify the number of postings made in the Cash account.

Explanation of Solution

Journal entry: Journal entry is a set of economic events which can be measured in monetary terms. These are recorded chronologically and systematically.

Debit: A debit, is an accounting term that refers to the left side of an account. The term debit is be denoted by (Dr). The recording amount on the left side of the account is known as debiting.

Credit: A credit, is an accounting term that refers to the right side of an account. The term credit is denoted as (Cr). The recording amount on the right side of the account is known as crediting.

Rules of Debit and Credit:

Following rules are followed for debiting and crediting different accounts while they occur in business transactions:

• Debit, all the increase in the assets, the expenses and the dividends, all the decrease in liabilities, revenues and the stockholders’ equities.
• Credit, all the increase in the liabilities, the revenues, and the stockholders’ equities, and all decreases in the assets, and the expenses.

Pass the journal entries for the given transactions:

	General Journal			Page - 1
Date	Description	Post	Debit	Credit
2019
June 1	Cash	101	$40,000
	JD Capital	301		$40,000
	(To record the receipt of capital)
June 2	Rent expense	514	$2,000
	Cash	101		$2,000
	(To record the payment of rent, Check 201)

Table (1)

	General Journal			Page - 2
Date	Description	Post	Debit	Credit
2019
June 3	Office Furniture	141	$12,000
	Cash	101		$2,000
	Accounts payable	202		$10,000
	(To record the purchase of office furniture on cash, Check 202, and on account Invoice 5103)
June 4	Supplies	121	$1,700
	Cash	101		$1,700
	(To record the purchase of supplies for cash, Check 203)
June 6	Cash	101	$7,000
	Fees income	401		$7,000
	(To record the receipt of fees)
June 7	Advertising expense	511	$3,000
	Cash	101		$3,000
	(To record the payment of advertising expense, Check 204)
June 8	Recording Equipment	151	$15,000
	Cash	101		$5,000
	Accounts payable	202		$10,000
	(To record the purchase of Equipment on cash, Check 205; and on account Invoice 2122)
June 10	Accounts receivable	111	$5,500
	Fees income	401		$5,500
	(To record the service provided on account)
June 11	Accounts payable	202	$3,000
	Cash	101		$3,000
	(To record the payment for office supplies, Invoice 5103 by Check 206)

Table (2)

	General Journal			Page - 3
Date	Description	Post	Debit	Credit
2019
June 12	Cash	101	$10,000
	Fees income	401		$10,000
	(To record the receipt of fees)
June 15	Salaries expense	517	$6,200
	Cash	101		$6,200
	(To record the payment of salaries, Checks 207)
June 18	Cash	101	$4,000
	Accounts receivable	111		$4,000
	(To record the receipt of cash from the credit clients)
June 20	Accounts payable	202	$6,000
	Cash	101		$6,000
	(To record the payment for office supplies, Invoice 2122 by Check 208)
June 25	Telephone expense	520	$375
	Cash	101		$375
	(To record the payment of telephone bill, Check 209)
June 27	Utilities expense	523	$980
	Cash	101		$980
	(To record the payment of utility bill, Check 210)
June 27	JD, Drawing	302	$5,000
	Cash	101		$5,000
	(To record the drawings made by the owner, Check 211)
June 30	Salaries expense	517	$6,200
	Cash	101		$6,200
	(To record the payment of salaries, Checks 212)

Table (3)

The number of postings made in the Cash Account is 16.

2.

To determine

Post the journal entries in the General Ledger.

Explanation of Solution

General ledger: General ledger is a record of all accounts of assets, liabilities, and stockholders’ equity, necessary to prepare financial statements. In the ledger all the entries are recorded in the account order, for which the transactions actually take place.

Post the journal entries in the General Ledger:

GENERAL LEDGER
ACCOUNT: Cash					Account No.:
Date	Description	Post. Ref.	Debit	Credit	Balance
					Debit	Credit
2019
June 1		J1	$ 40,000		$ 40,000
June 2		J1		$ 2,000	$ 38,000
June 3		J2		$ 2,000	$ 36,000
June 4		J2		$ 1,700	$ 34,300
June 6		J2	$ 7,000		$ 41,300
June 7		J2		$ 3,000	$ 38,300
June 8		J2		$ 5,000	$ 33,300
June 11		J2		$ 3,000	$ 30,300
June 12		J3	$ 10,000		$ 40,300
June 15		J3		$ 6,200	$ 34,100
June 18		J3	$ 4,000		$ 38,100
June 20		J3		$ 6,000	$ 32,100
June 25		J3		$ 375	$ 31,725
June 27		J3		$ 980	$ 30,745
June 28		J3		$ 5,000	$ 25,745
June 30		J3		$ 6,200	$ 19,545

Table (4)

GENERAL LEDGER
ACCOUNT: Accounts receivable					Account No.: 111
Date	Description	Post. Ref.	Debit	Credit	Balance
					Debit	Credit
2019
June 10		J2	$ 5,500		$ 5,500
June 18		J3		$ 4,000	$ 1,500
ACCOUNT: Supplies					Account No.: 121
Date	Description	Post. Ref.	Debit	Credit	Balance
					Debit	Credit
2019
June 4		J2	$ 1,700		$ 1,700
ACCOUNT: Office Furniture					Account No.: 141
Date	Description	Post. Ref.	Debit	Credit	Balance
					Debit	Credit
2019
June 3		J2	$ 12,000		$ 12,000
ACCOUNT: Equipment					Account No.: 151
Date	Description	Post. Ref.	Debit	Credit	Balance
					Debit	Credit
2019
June 8		J2	$ 15,000		$ 15,000
ACCOUNT: Accounts payable					Account No.: 202
Date	Description	Post. Ref.	Debit	Credit	Balance
					Debit	Credit
2019
June 3		J2		$ 10,000		$ 10,000
June 8		J2		$ 10,000		$ 20,000
June 11		J2	$ 3,000			$ 17,000
June 20		J3	$ 6,000			$ 11,000
ACCOUNT: JD Capital					Account No.: 301
Date	Description	Post. Ref.	Debit	Credit	Balance
					Debit	Credit
2019
June 1		J1		$ 40,000		$ 40,000

Table (5)

GENERAL LEDGER
ACCOUNT: JD Drawings					Account No.: 302
Date	Description	Post. Ref.	Debit	Credit	Balance
					Debit	Credit
2019
June 28		J3	$ 5,000		$ 5,000
ACCOUNT: Fees Income					Account No.: 401
Date	Description	Post. Ref.	Debit	Credit	Balance
					Debit	Credit
2019
June 6		J2		$ 7,000		$ 7,000
June 10		J2		$ 5,500		$ 12,500
June 12		J2		$ 10,000		$ 22,500
ACCOUNT: Advertising Expense					Account No.: 511
Date	Description	Post. Ref.	Debit	Credit	Balance
					Debit	Credit
2019
June 7		J2	$ 3,000		$ 3,000
ACCOUNT: Rent Expense					Account No.: 514
Date	Description	Post. Ref.	Debit	Credit	Balance
					Debit	Credit
2019
June 1		J1	$ 2,000		$ 2,000
ACCOUNT: Salaries Expense					Account No.: 517
Date	Description	Post. Ref.	Debit	Credit	Balance
					Debit	Credit
2019
June 15		J3	$ 6,200		$ 6,200
June 30		J3	$ 6,200		$ 6,200
ACCOUNT: Telephone Expense					Account No.: 520
Date	Description	Post. Ref.	Debit	Credit	Balance
					Debit	Credit
2019
June 25		J3	$ 375		$ 375

Table (6)

GENERAL LEDGER
ACCOUNT: Utilities Expense					Account No.: 523
Date	Description	Post. Ref.	Debit	Credit	Balance
					Debit	Credit
2019
June 25		J3	$ 980		$ 980

Table (7)

3.

To determine

Draft the trial balance for Company LCA.

Explanation of Solution

Trial balance: Trial balance is a summary of all the asset, liability, and equity accounts and their balances.

Company LCA
Trial Balance
Month Ended June 30, 2019
Account Name	Debit	Credit
Cash	$ 19,545
Accounts Receivable	$ 1,500
Supplies	$ 1,700
Office Furniture	$ 12,000
Recording Equipment	$ 15,000
Accounts Payable		$ 11,000
JD, Capital		$ 40,000
JD, Drawing	$ 5,000
Fees Income		$ 22,500
Advertising Expenses	$ 3,000
Rent Expense	$ 2,000
Salaries Expense	$ 12,400
Telephone Expense	$ 375
Utilities Expense	$ 980
Total	$ 73,500	$ 73,500

Table (8)

4.

To determine

Prepare Income Statement for Company LCA.

Explanation of Solution

Income statement:

Income statement is a financial statement that shows the net income or net loss by deducting the expenses from the revenues and vice versa.

Company LCA
Income Statement
Month Ended June 30, 2019
Particulars	Amount ($)	Amount ($)
Revenues
Fees Income		$ 22,500
Expenses
Advertising Expenses	$ 3,000
Rent Expense	$ 2,000
Salaries Expense	$ 12,400
Telephone Expense	$ 375
Utilities Expense	$ 980
Total expenses		$ 18,755
Net income		$ 3,745

Table (9)

5.

To determine

Prepare the Statement of Owner's equity for Company LCA.

Explanation of Solution

Statement of owner's’ equity:

This statement reports the beginning owner’s equity and all the changes which led to ending owner's’ equity.

Company LCA
Statement of Owner's Equity
Month Ended June 30, 2019
Particulars	Amount ($)	Amount ($)
JD Capital, June 1, 2019		$ 40,000
Net income for June	$ 3,745
Deduct - Withdrawals	$ 5,000
Decrease in Capital		($ 1,255)
JD Capital, June 30, 2019		$ 38,745

Table (10)

6.

To determine

Prepare the Balance sheet for Company LCA.

Explanation of Solution

Balance Sheet:

Balance Sheet summarizes the assets, the liabilities, and the Shareholder’s equity of a company at a given date. It is also known as the statement of financial status of the business

Company LCA
Balance sheet
As on June 30, 2019
Particulars	Amount	Particulars	Amount
Assets		Liabilities
Cash	$ 19,545	Accounts payable	$ 11,000
Accounts Receivable	$ 1,500	Owner's equity
Supplies	$ 1,700	JD Capital	$ 38,745
Office Furniture	$ 12,000
Recording Equipment	$ 15,000
Total assets	$ 49,745	Total liabilities and owner's equity	$ 49,745

Table (11)