3rd Edition

ISBN: 9780136912644

Author: Elizabeth A. Gordon; Jana S. Raedy; Alexander J. Sannella

Publisher: Pearson Education (US)

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Textbook Question

Chapter 4, Problem 4.8P

Transaction Analysis; Journal Entries; Adjusting Journal Entries, Posting, Adjusted Trial Balance.

The post-closing trial balance for Heron Consulting Services, Inc. at December 31 of the prior year is presented here.

Heron Consulting Services, Inc. Post-Closing Trial Balance At December 31 (Prior Year)
Account	Debit	Credit
Cash	$1,000
Accounts Receivable	800
Supplies	150
Prepaid Rent	300
Building	6,500
Accounts Payable		$ 750
Unearned Service Revenue		400
Common Stock		5,000
Retained Earnings		2,600
Service Revenue		0
Wage Expense	0
Utilities Expense	0
Administrative Expense	0
Totals	$8,750	$8,750

The company reported the following transactions during the current year:

January 2: Heron took out a 5%, 2-year note payable in the amount of $3,000 to pay for operating expenses. Interest is paid annually on January 1.
February 1: Heron prepaid $600 for a one-year insurance policy. Policy begins February 1.
March 1: Heron purchased office supplies for cash, $275.
March 23: Heron paid $300 cash for advertising expenses.
April 1: The existing balance of prepaid rent expired, so the company prepaid an additional $480 for a one-year lease on a warehouse.
May 1: Heron signed a contract to perform consulting services and collected $550. Heron will not provide the services until next year.
June 30: Heron paid wages in the amount of $200 to employees in cash.
July 1: The company received $2,150 in cash for services rendered that day.
August 8: Heron paid a utilities bill in the amount of $70 in cash.
September 1: Heron paid wages in the amount of $80 in cash.
October 1: Heron collected $250 of the accounts receivable balance.
November 14: Heron purchased office equipment in the amount of $1,800 with cash Heron will record $50 of depreciation on the equipment this year.
December 6: Heron received a bill for $100 for deliveries made this year and will pay the bill next year.

Note: At year-end, Heron had $100 of supplies remaining on hand Also, services pertaining to the beginning balance of unearned service revenue were performed during the year Finally, Heron reports $500 of depreciation expense related to the buildings.

Required

a. Show the accounting equation effect of each of the original transactions.
b. Prepare the journal entries for the original transactions Omit explanations.
c. Prepare any necessary year-end adjusting journal entries for these transactions Show the accounting equation effect of each of the adjusting journal entries.
d. Post all entries to the T-accounts.
e. Prepare the adjusted trial balance at the end of the year.

Chapter 4, Problem 4.8P, Transaction Analysis; Journal Entries; Adjusting Journal Entries, Posting, Adjusted Trial Balance.

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.

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Chapter 4, Problem 4.7P

Chapter 4, Problem 4.9P

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Chapter 4 Solutions

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Solution Summary: The author explains the accounting equation, which shows the relationship between assets, liability, and equity of the company. Journalizing is the process of recording the transactions of an organization in a chronological order.

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