Question

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

a. Brina Valdez invested \(20,000 cash in the company in exchange for common stock.

b. The company provided services to a client and immediately received \)900 cash.

c. The company received \(10,000 cash from a client in payment for services to be provided next year.

d. The company received \)3,500 cash from a client in partial payment of accounts receivable.

e. The company borrowed $5,000 cash from the bank by signing a note payable.

2. Transactions a, c, d,and edid not yield revenue. Match each transaction (a, c, d,and e) with one of the following reasons for not recording revenue.

_______This transaction changed the form of an asset from a receivable to cash. Total assets were not increased (revenue was recognized when the services were originally provided).

_______This transaction brought in cash (increased assets), and it also increased a liability by the same amount (represented by the signing of a note to repay the amount).

_______This transaction brought in cash, but this is an owner investment.

This transaction brought in cash, and it created a liability to provide services to the client in the next year.

Short answer

Answer

Total of journal matches at $39,400 and the transactions (d), (e), (a), and (c) are the correct fit for statements 1, 2, 3, and 4 respectively.

Step-by-step solution

Journal entries

Date	Description	Debit	Credit
a	Cash	$20,000
	Common Stock		$20,000
	Being amount invested in the stock
b	Cash	$900
	Service Revenue		$900
	Being services provided for cash
c	Cash	$10,000
	Unearned Revenue		$10,000
	Being cash received for undelivered service
d	Cash	$3,500
	Accounts Receivables		$3,500
	Being cash collected from receivables
e	Cash	$5,000
	Notes Payable		$5,000
	Being amount borrowed against notes payable
	Total	$39,400	$39,400

Matching transaction with the statement

Statement 1–In transaction (d), $3,500 is being received as a collection from the receivables. So, this transaction has only changed the asset form but the asset has not increased.

Statement 2–In transaction (e), an amount is being borrowed against a liability (notes payable). So, this transaction has increased assets as well as the liability.

Statement 3–In transaction (a), the owner has invested the amount for common stock. So, this has brought in cash against the owner’s equipment.

Statement 4–In transaction (c), the amount has been received for the undelivered service. So, this has not only created an asset but also a liability to provide service.