Question

Question:1. Prepare general journal entries for the following transactions of Valdez Services.

a. The company paid \(2,000 cash for payment on a 6-month-old account payable for office supplies.

b. The company paid \)1,200 cash for the just completed two-week salary of the receptionist.

c. The company paid \(39,000 cash for equipment purchased.

d. The company paid \)800 cash for this month’s utilities.

e. The company paid $4,500 cash in dividends to the owner (sole shareholder).

2. Transactions a, c,and edid not record an expense. Match each transaction (a, c,and e) with one of the following reasons for not recording an expense.

______This transaction is a distribution of cash to the owner. Even though equity decreased, that decrease did not occur in the process of providing goods or services to customers.

______This transaction decreased cash in settlement of a previously existing liability (equity did not change). Supplies expense is recorded when assets are used, not necessarily when cash is paid.

______This transaction involves the purchase of an asset. The form of the company’s assets changed, but total assets did not (and neither did equity).

Short answer

Answer

Total of journal matches at$47,500 and the transactions (e), (a), and (c) are the correct fit for statements 1, 2, and 3 respectively.

Step-by-step solution

Journal entries

Date	Description	Debit	Credit
a	Accounts Payable	$2,000
	Cash		$2,000
	Being old account payable paid off
b	Salary	$1,200
	Cash		$1,200
	Being salary paid to the receptionist
c	Equipment	$39,000
	Cash		$39,000
	Being equipment purchased for cash
d	Utility Expense	$800
	Cash		$800
	Being utility expense paid
e	Dividend	$4,500
	Cash		$4,500
	Being dividend paid
	Total	$47,500	$47,500

Matching transaction with the statement

Statement 1–In transaction (e), $4,500 is paid to the owner as a dividend. This is a kind of distribution to the owner, so the correct answer is transaction (e).

Statement 2–In transaction (a), the cash is being paid to settle the old accounts payable or liability. So, transaction (a) would be filled in the blanks.

Statement 3–In transaction (c), the equipment has been purchased for cash. So transaction (e) is the correct answer or statement 3.