3rd Edition

ISBN: 9780137391707

Author: GORDON

Publisher: PEARSON

Concept explainers

The transaction analysis is done with the help of the accounting equation. The basic accounting equation is alternatively known as the balance sheet equation is based on the double-entry system which says that for each transaction happening in a business…

Videos

Textbook Question

Chapter 4, Problem 4.2P

Transaction Analysis; Journal Entries; Adjusting Journal Entries. Branton Stores began operations on January 1, 2018. Branton had the following transactions in its first year of business:

January 4: Owners invested $400,000 (the par value of the stock) in exchange for 40,000 shares of common stock.
January 31: Branton purchased an office building for $320,000 and paid for the purchase with a note payable. Interest in the amount of $16,000 will be due annually on January 31 of each year, beginning in 2019.
February 1: Branton rented out a portion of its office building to another company. The renter signed a rental lease for the period of February 1, 2018, to January 31, 2019, and paid the annual rent amount of $60,000 upfront in cash.
March 1: Branton paid $12,000 cash for administrative expenses.
March 28: Branton purchased supplies in the amount of $42,000 on account with the supplier.
April 8: Branton purchased a one-year insurance policy that runs from May 1, 2018, to April 30, 2019, in the amount of $62,000 and paid for the policy in full in cash.
May 1: Branton recorded sales revenue in the amount of $240,000 that was received in cash from customers. Ignore Cost of Goods Sold.
July 6: Branton paid employees $34,000 in wages in cash.
September 30: Branton recorded $320,000 in sales revenue. Of this amount, $200,000 was paid in cash and the remainder was on account. Ignore Cost of Goods Sold.
October 31: Branton received a cash payment from a customer in the amount of $40,000 to be applied to its account balance related to the September 30 sale.
November 15: Branton purchased supplies in the amount of $26,000 on account with the vendor.
December 1: Branton recorded sales revenue in the amount of $222,000, all on credit. Ignore Cost of Goods Sold
December 22: Branton received a legal bill for $14,000, which it will pay when due in February 2019.

Note: Branton records straight-line depreciation on buildings, using a 32-year life and a salvage value of zero. At year-end, wages for 2018 in the amount of $86,000 are due to employees and will be paid in January 2019. Supplies in the amount of $6,000 remain on hand on December 31.

Required

a. Prepare the journal entries for the transactions. Omit explanations.
b. Show the accounting equation effect of each of these transactions.
c. Prepare any necessary year-end adjusting journal entries for these transactions.
d. Show the accounting equation effect of each of the adjusting journal entries.

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Chapter 4, Problem 4.1P

Chapter 4, Problem 4.3P

Students have asked these similar questions

On May 31, 2026, Oriole Company paid $3,290,000 to acquire all of the common stock of Pharoah Corporation, which became a division of Oriole. Pharoah reported the following balance sheet at the time of the acquisition: Current assets $846,000 Current liabilities $564,000 Noncurrent assets 2,538,000 Long-term liabilities 470,000 Stockholder's equity 2,350,000 Total assets $3,384,000 Total liabilities and stockholder's equity $3,384,000 It was determined at the date of the purchase that the fair value of the identifiable net assets of Pharoah was $2,914,000. At December 31, 2026, Pharoah reports the following balance sheet information: Current assets $752,000 Noncurrent assets (including goodwill recognized in purchase) 2,256,000 Current liabilities (658,000) Long-term liabilities (470,000) Net assets $1,880,000 It is determined that the fair value of the Pharoah division is $2,068,000.

The following transactions involving intangible assets of Oriole Corporation occurred on or near December 31, 2025. 1.) Oriole paid Grand Company $520,000 for the exclusive right to market a particular product, using the Grand name and logo in promotional material. The franchise runs for as long as Oriole is in business. 2.) Oriole spent $654,000 developing a new manufacturing process. It has applied for a patent, and it believes that its application will be successful. 3.) In January 2026, Oriole's application for a patent (#2 above) was granted. Legal and registration costs incurred were $247,800. The patent runs for 20 years. The manufacturing process will be useful to Oriole for 10 years. 4.) Oriole incurred $168,000 in successfully defending one of its patents in an infringement suit. The patent expires during December 2029. 5.) Oriole incurred $446,400 in an unsuccessful patent defense. As a result of the adverse verdict, the patent, with a remaining unamortized cost of…

Chapter 4 Solutions

INTERMEDIATE ACCT.-MYLAB COMBO ACCESS

Ch. 4 - Prob. 4.1Q Ch. 4 - ShoeBuy uses reversing entries for events such as...Ch. 4 - What is equity? What are the three components of...Ch. 4 - Prob. 4.4Q Ch. 4 - Will all transactions have a dual effect on the...Ch. 4 - Prob. 4.6Q Ch. 4 - What is meant by the term normal balance? Provide...Ch. 4 - Why is the general journal referred to as the book...Ch. 4 - Are account balances found in the general ledger?...Ch. 4 - What is the purpose of an unadjusted trial...

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Solution Summary: The author describes journalizing as the process of recording the transactions of an organization in a chronological order.

Concept explainers

Videos

Want to see the full answer?

Chapter 4 Solutions