Set B
2. Basic journal entries. The following transactions pertain to the Jennifer Royall Company:
May 1 Jennifer Royall invested cash of $25,000 and land valued at $15,000 into the business.
Cash
Land
25,000
15,000
Owners Equity
(Investment by owner)
40,000
14
20
24
Set B
3. Balance sheet preparation.
The following data relate to Preston Company as of December 31, 20XX:
Building
Cash
J. Preston, capital
Accounts payable ?
$44,000
17,000
65,000
Accounts receivable
Loan payable
Land
$24,000
30,000
21,000
$21,000
24,000
45,000
Long-Term Liabilities:
Loan
payable
Total Long-Term Liabilities
Total
Liabilities
Long-Term Assets:
Building
Land
Total Long-Term Assets
Total Assets
Liabilities
Current Liabilities:
Accounts payable
Total Current liabilities
40,000
21,000
61,000
$ 106,000
Capital
J. Preston Capital
Total Liabilities and Capital
$11,000
11,000
30,000
30,000
41,000
65,000
$ 106,000
Set B
4. Basic Transaction Processing
On November 1 of the current year, Richard Simmons established a sole
proprietorship.
The following transactions occurred during the month:
1. Simmons invested $32,000 into the business for $32,000 common stock.
2. Paid $5,000 to acquire a used minivan
3. Purchased $1,800 of office furniture on account
4. Performed $2,100 of consulting services on account
5. Paid $300 of repair expenses
6. Received $800 from clients who were previously billed in item 4.
7. Paid $500 on account to the supplier of office furniture in item 3.
8. Received a $150 electric bill, to be paid next month.
9. Simmons withdrew $800 from the business
10. Received $250 in cash from clients for consulting services rendered
a. & b.
Assets
= Liabilities +
Cash
1
$32,000
2
($5,000)
3
4
5
($300)
6
$800
7
($500)
8
9
($800)
10
$250
$26,450
Accounts
Receivable
Office
Furniture Van
Accounts
Payable
Equity
(+)Com
Stock
(+) Rev
(-) Dividend (-) Exp
$32,000
$5,000
$1,800
$1,800
$2,100
$2,100
($300)
($800)
($500)
$150
($150)
($800)
$1,300
$1,800
$5,000
$1,450
$31,200
$250
$1,900
Set B
c.
1. Liabilities = $1,450. Liabilities appear on the balance sheet.
2. Revenue - Expenses = Net Profit. Revenue exceeded expenses by $1,900 and cash is positive, indicating a good month.
Set B
5. Transaction analysis and statement preparation.
The transactions that follow relate to Burton Enterprises for March 20X1,
the company's first month of activity.
3/1
3/4
3/7
3/12
3/15
3/18
3/31
Joanne Burton, the owner, invested $20,000 cash into the business.
Performed $2,400 of services on account.
Acquired a small parcel of land by paying $6,000 cash
Received $500 from a client who was billed previously on March 4.
Paid $200 to the Journal Herald for advertising expense.
Acquired 9,000 of equipment from Park Central Outfitters by Paying
$7,000 down and agreeing to remit the balance owed within two weeks (A/P).
Received $300 cash from clients for services.
Paid $1,500 on account to Park Central Outfitters in partial settlement of
the balance due from the transaction on March 18.
Rented a car from United Car Rental for use on March 28. Total charges
amounted to $125, with United billing Burton for the amount due.
Paid $600 for March wages
3/31
Processed a $600 cash withdrawal (dividend) from the business for Joanne
Burton
3/22
3/24
3/28
Assets
3/1
3/4
3/7
3/12
3/15
3/18
3/22
Cash
$20,000
Accounts
Receivable
Land
Equipment
Liabilities +
Accounts
Payable
$2,400
($6,000)
$500
($200)
($7,000)
$300
Equity
(+)Com
Stock
(+) Rev
(-) Dividend (-) Exp
$20,000
$2,400
$6,000
($500)
($200)
$9,000
$2,000
$300
Set B
3/24
3/28
3/31
3/31
($1,500)
($600)
($600)
$4,900
($1,500)
$125
$1,900
$6,000
$9,000
$625
Burton Enterprises
Income Statement
For the Period Ending March 20X1
Revenue
Expenses:
Advertising
Expense
Auto Expense
Wage Expense
Net Income
$2,700
$200
$125
$600
$925
$1,775
Burton Enterprises
Statement of Retained Earnings
For the Period Ending March 20X1
Beginning Retained Earnings Balance (3/1/20X1)
Add: Net Income
Sub total
$0
$1,775
Subtract: Dividends
Ending Retained Earnings Balance (3/31/20X1)
$1,775
$600
$1,175
($125)
($600)
($600)
$19,400
$1,775
Set B
Burton Enterprises
Balance Sheet
March 31, 20X1
Assets:
Cash
Accts Rec
Land
$4,900
$1,900
$6,000
Equipment
Total Assets
$9,000
$21,800
Liabilities:
Accts Pay
Total Liabilities
Stockholders Equity:
Common Stock
Retained Earnings
Total Stockholders Equity
Total Liabilities & Equity
$625
$625
$20,000
$1,175
$21,175
$21,800
Set B
The general Ledger also revealed account # 530, Legal & Accounting Expense.
The following transactions occurred during June:
6/2
Collected $3,000 on account from customers
6/7
Sold 25% of the equipment and supplies to a young artist for $700 cash
6/10
6/15
6/27
6/30
Received a $300 invoice from the accountant for preparing last quarter's
financial Statements.
Paid $1,900 to creditors on account.
Adkins withdrew $2,000 cash for personal use.
Billed a customer $3,000 for a portrait painted this month.
Account Name
Cash
Accounts Receivable
Equipment & Supplies
Studio
Accounts Payable
Lee Adkins, Capital
Lee Adkins, Drawing
Professional Fee Revenue
Advertising Expense
Salaries Expense
Utilities Expense
Debit
Credit
2,700
12,100
2,800
45,000
2,600
57,400
30,000
39,000
2,300
2,100
2,000
99,000
99,000
Set B
a.
Date
20XX
6/2
6/7
6/10
6/15
6/27
6/30
Set B
b. & c
Date 20XX
5/31
6/2
6/7
6/15
6/27
Date 20XX
5/31
6/2
6/30
Date 20XX
5/31
6/7
Date 20XX
5/31
Exp.
Balance
Cash
Post Ref.
Debit
J2
J2
J2
J2
Exp.
Balance
3,000
700
3,000
Exp.
Balance
Studio
Post Ref.
Debit
Balance
2,700
5,700
6,400
1,900
4,500
2,000
2,500
Acct.
120
Credit
Accts Receivable
Post Ref.
Debit
J2
J2
Exp.
Balance
Acct.
110
Credit
Balance
12,100
3,000
9,100
12,100
Acct.
130
Credit
Balance
2,800
700
2,100
Acct.
140
Credit
Balance
45,000
Set B
Date 20XX
5/31
6/10
6/15
Date 20XX
5/31
Date 20XX
5/31
6/27
Date 20XX
5/31
6/30
Exp.
Balance
J2
J2
Exp.
Balance
Exp.
Balance
1,900
Balance
2,600
300
2,900
1,000
Acct.
310
Credit
Acct.
320
Credit
J2
Exp.
Balance
Acct.
210
Credit
Accounts Payable
Post Ref.
Debit
2,000
Advertising Expense
Acct.
410
Credit
Balance
57,400
Balance
30,000
32,000
Balance
39,000
3,000
42,000
Acct.
510
Set B
Date 20XX
5/31
Date 20XX
5/31
Date 20XX
6/10
Date 20XX
5/31
Exp.
Balance
Exp.
Balance
Exp.
Exp.
Balance
Post Ref.
Debit
Credit
Salaries Expense
Post Ref.
Debit
Acct.
520
Credit
Utilities Expense
Post Ref.
Debit
Acct.
530
Credit
Acct.
540
Credit
Balance
2,300
Balance
2,100
Balance
300
Balance
2,000
Set B
d.
Adkins Studio
Trial Balance
June 30, 20XX
Cash
Accounts Receivable
Equipment & Supplies
Studio
Accounts Payable
Lee Adkins, Capital
Lee Adkins, Drawing
Professional Fee Revenue
Advertising Expense
Salaries Expense
Legal & Accounting Exp
Utilities Expense
2,500
12,100
2,100
45,000
1,000
57,400
32,000
42,000
2,300
2,100
300
2,000
100,400
100,400
Set B
7. Journal entry preparation - On January 1 of the current year, Peter Houston invested $80,000 cash into his company MuniServ. The cash was
obtained from an owner investment by Peter Houston of $50,000 and a $30,000 bank loan. Shortly thereafter, the company acquired selected
assets of a bankrupt competitor. The acquisition included land ($10,000), a building ($40,000), and vehicles ($10,000). MuniServ paid $45,000 at
the time of the transaction and agreed to remit the remaining balance due of $15,000 (an account payable) by February 15.
During January, the company had additional cash outlays for the following items:
Purchases of store equipment
4600
Note payment
500
Salaries expense
2300
Advertising expense
700
The January utility bill of $200 was received on January 31 and will be paid next month.
MuniServ rendered services to clients on account amounting to $9,400. All customers have been billed;
by month-end, $3,700 had been received in settlement of account balances.
a.
Present journal entries that reflect MuniServ's January transactions, including the $80,000 raised from the owner investment and loan.
a.
Present journal entries that reflect MuniServ's January transactions, including the $80,000 raised
from the owner investment and loan.
Cash
80,000
Loan payable
Peter Houston, Capital
Land
Building
Vehicles
30,000
50,000
10,000
40,000
10,000
Cash
Accounts payable
45,000
15,000
Set B
Store equipment
4,600
Cash
Note payable
4,600
500
Cash
Salary expense
500
2,300
Cash
Advertising expense
2,300
700
Cash
Utility expense
700
200
Accounts payable
Accounts receivable
200
9,400
Revenue
Cash
9,400
3,700
Accounts receivable
3,700
Set B
b. Compute the total debits, total credits, and ending balance that would be found in the company's Cash account.
General Ledger
Cash Account
Date
Description
1/1/20xx
1/X/20XX
Investment
Purchase assets
Purchase store
equip
Paid note
Paid salaries
Paid advertising
Collected A/R
1/X/20XX
1/X/20XX
1/X/20XX
1/X/20XX
1/X/20XX
Total
c.
Debit
Credit
Balance
80,000
45,000
store
equip
4,600
500
2,300
700
3,700
83,700
80,000
35,000
30,400
29,900
27,600
26,900
30,600
53,100
Determine the amount that would be shown on the January 31 trial balance for Accounts Payable. Is the balance a debit or a credit?
Accounts payable
Date
Description
1/1/20xx
1/X/20XX
Purchase assets
Utility expense
Debit
Credit
Balance
15,000
200
15,000
15,200