Chapter 6, Problem 2PB

2.

To determine

Journalize the adjusting entries.

Explanation of Solution

Journalizing: Journalizing is a process of recording the financial transactions of a business in a chronological order. Based on the recorded entries, the accounts are posted to the relevant ledger accounts.

Record office supplies used:

General Journal				Page 3
Date	Account Title and Explanation	Post Ref.	Debit ($)	Credit ($)
December 31, 2019	Supplies expense		3,000
	Supplies			3,000
	(To record supplies used)

Table (1)

• Since supplies expense is an expense, expenses are increased. Hence, supplies expense is debited.
• Since supplies are asset, assets are decreased. Hence, supplies account is credited.

Record expire advertising expense:

General Journal				Page 3
Date	Account Title and Explanation	Post Ref.	Debit ($)	Credit ($)
December 31, 2019	Advertising expense		1,200
	Prepaid advertising			1,200
	(To record expired advertising expense)

Table (2)

• Advertising expense is an expense and expenses are increased. Hence, advertising expense is debited.
• Prepaid advertising is an asset and assets are decreased. Hence, prepaid advertising is credited.

Record depreciation expense-equipment:

General Journal				Page 3
Date	Account Title and Explanation	Post Ref.	Debit ($)	Credit ($)
December 31, 2019	Depreciation expense		1,500
	Accumulated depreciation			1,500
	(To record depreciation expense)

Table (3)

• Depreciation expense is an expense and expenses are increased. Hence, depreciation expense is debited.
• Accumulated depreciation-equipment is a contra-asset and it is increased. Hence, Accumulated depreciation-equipment is credited.

3.

To determine

Journalize the closing entries.

Explanation of Solution

Journal entries for the closing adjustments are as follows:

General Journal				Page 4
Date	Account Title and Explanation	Post Ref.	Debit ($)	Credit ($)
December 31, 2019	Fees income		46,800
	Income summary			46,800
	(To close fees income)

Table (4)

• Fees income is revenue account and it is closed at the end of the year. Hence, fees income account is debited.
• Since the amount of fees income transferred to income summary, the account of income summary increases. Hence, income summary account is credited.

General Journal				Page 4
Date	Account Title and Explanation	Post Ref.	Debit ($)	Credit ($)
December 31, 2019	Income summary		21,900
	Depreciation expense			1,500
	Salaries expense			14,400
	Supplies expense			3,000
	Utilities expense			1,800
	Advertising expense			1,200
	(To close expenses account)

Table (5)

• The expenses account balances are transferred to the income summary account, to bring the expenses account balances to zero. Thus, income summary is debited.
• Depreciation expense is an expense and expenses are decreased. Hence, depreciation expense is credited.
• Salaries expense is an expense and expenses are decreased. Hence, salaries expense is credited.
• Supplies expense is an expense and expenses are decreased. Hence, supplies expense is credited.
• Utilities expense is an expense and expenses are decreased. Hence, utilities expense is credited.
• Advertising expense is an expense and expenses are decreased. Hence, advertising expense is credited.

General Journal				Page 4
Date	Account Title and Explanation	Post Ref.	Debit ($)	Credit ($)
December 31, 2019	Income summary $\left(\$46,800-\$21,900\right)$		24,900
	SJ Capital			24,900
	(To close the amount of income summary)

Table (6)

• The amount of income summary is decreased. Hence, the income summary account is debited.
• The capital account increases. Hence, the SJ capital gets credited.

General Journal				Page 4
Date	Account Title and Explanation	Post Ref.	Debit ($)	Credit ($)
December 31, 2019	SJ Capital		8,400
	SJ Drawings			8,400
	(To close the amount of drawing account)

Table (7)

• The amount of drawings adjusted from the capital account, the amount of capital account decreases. Hence the account of SJ Capital debited.
• The account of drawings increases. Hence, the SJ Drawings gets credited.

1, 2 and 3.

To determine

Record the balance as of December 31, 2019 in the ledger accounts and post the adjusting entries and closing entries.

Explanation of Solution

Record the balance as of December 31, 2019 in the ledger accounts and post the adjusting entries and closing entries.

Supplies Account
Date	Particular	Debit ($)	Credit ($)	Balance ($)
December 31, 2019	Balance			6,000 (debit)
	Adjusting		3,000	3,000 (Debit)

Table (8)

Prepaid Advertising Account
Date	Particular	Debit ($)	Credit ($)	Balance ($)
December 31, 2019	Balance			9,000 (debit)
	Adjusting		1,200	7,800 (debit)

Table (9)

Accumulated Depreciation Account
Date	Particular	Debit ($)	Credit ($)	Balance ($)
December 31, 2019	Adjusting		1,500	1,500 (credit)

Table (10)

SJ Capital Account
Date	Particular	Debit ($)	Credit ($)	Balance ($)
December 31, 2019	Balance			82,200 (credit)
	Closing		24,900	107,100 (credit)
	Closing	8,400		98,700 (credit)

Table (11)

SJ Drawings Account
Date	Particular	Debit ($)	Credit ($)	Balance ($)
December 31, 2019	Balance			8,400 (debit)
	Closing		8,400	-

Table (12)

Income Summary Account
Date	Particular	Debit ($)	Credit ($)	Balance ($)
December 31, 2019	Closing		46,800	46,800 (credit)
	Closing	21,900		24,900 (credit)
	Closing	24,900		-

Table (13)

Fees Income Account
Date	Particular	Debit ($)	Credit ($)	Balance ($)
December 31, 2019	Balance			46,800 (credit)
	Closing	46,800		-

Table (14)

Salaries Expense Account
Date	Particular	Debit ($)	Credit ($)	Balance ($)
December 31, 2019	Balance			14,400 (debit)
	Closing		14,400	-

Table (15)

Utilities Expense Account
Date	Particular	Debit ($)	Credit ($)	Balance ($)
December 31, 2019	Balance			1,800 (debit)
	Closing		1,800	-

Table (16)

Supplies Expense Account
Date	Particular	Debit ($)	Credit ($)	Balance ($)
December 31, 2019	Balance	3,000		3,000 (debit)
	Closing		3,000	-

Table (17)

Depreciation Expense Account
Date	Particular	Debit ($)	Credit ($)	Balance ($)
December 31, 2019	Balance	1,500		1,500 (debit)
	Closing		1,500	-

Table (18)

Advertising Expense Account
Date	Particular	Debit ($)	Credit ($)	Balance ($)
December 31, 2019	Adjusting	1,200		1,200 (debit)
	Closing		1,200	-

Table (19)

4.

To determine

Prepare a post-closing trial balance.

Explanation of Solution

Trial balance of Company CV is given below:

Company CV Post-closing Trial Balance December 31, 2019
Account Title	Debit ($)	Credit ($)
Cash	32,400
Accounts Receivable	6,000
Supplies	3,000
Prepaid Advertising	7,800
Equipment	60,000
Accumulated Depreciation		1,500
Accounts Payable		9,000
SJ, Capital		98,700
Total	109,200	109,200

Table (20)