Chapter 2: Q6DQ (page 79)
Should a transaction be recorded first in a journal or the ledger? Why?
A transaction should be first recorded into the journal.
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SP 2 On October 1, 2017, Santana Rey launched a computer services company called Business Solutions, which provides consulting services, computer system installations, and custom program development. Rey adopts the calendar year for reporting purposes and expects to prepare the company’s first set of financial statements on December 31, 2017. The company’s initial chart of accounts follows.
Account No. Account No.
Cash ………………...................... 101 Common Stock ……………...... 307
Accounts Receivable ………….. 106 Dividends ………………………. 319
Computer Supplies …………….. 126 Computer Services Revenue ..403
Prepaid Insurance ……………….128 Wages Expense ………………. 623
Prepaid Rent ………………………131 Advertising Expense ………….655
Office Equipment ……………….. 163 Mileage Expense ……………… 676
Computer Equipment ……………167 Miscellaneous Expenses ……. 677
Accounts Payable ………………..201 Repairs Expense—Computer ..684
Required
1. Prepare journal entries to record each of the following transactions for Business Solutions.
Oct. 1 S. Rey invested \(45,000 cash, a \)20,000 computer system, and \(8,000 of office equipment in the company in exchange for its common stock.
2 The company paid \)3,300 cash for four months’ rent. (Hint:Debit Prepaid Rent for \(3,300.)
3 The company purchased \)1,420 of computer supplies on credit from Harris Office Products.
5 The company paid \(2,220 cash for one year’s premium on a property and liability insurance policy. (Hint:Debit Prepaid Insurance for \)2,220.)
6 The company billed Easy Leasing \(4,800 for services performed in installing a new web server.
8 The company paid \)1,420 cash for the computer supplies purchased from Harris Office Products on October 3.
10 The company hired Lyn Addie as a part-time assistant for \(125 per day, as needed.
12 The company billed Easy Leasing another \)1,400 for services performed.
15 The company received \(4,800 cash from Easy Leasing as partial payment on its account.
17 The company paid \)805 cash to repair computer equipment that was damaged when moving it.
20 The company paid \(1,728 cash for advertisements published in the local newspaper.
22 The company received \)1,400 cash from Easy Leasing on its account.
28 The company billed IFM Company \(5,208 for services performed.
31 The company paid \)875 cash for Lyn Addie’s wages for seven days’ work.
31 The company paid \(3,600 cash in dividends.
Nov. 1 The company reimbursed S. Rey in cash for business automobile mileage allowance (Rey logged 1,000 miles at \)0.32 per mile).
2 The company received \(4,633 cash from Liu Corporation for computer services performed.
5 The company purchased computer supplies for \)1,125 cash from Harris Office Products.
8 The company billed Gomez Co. \(5,668 for services performed.
13 The company received notification from Alex’s Engineering Co. that Business Solutions’s bid of \)3,950 for an upcoming project was accepted.
18 The company received \(2,208 cash from IFM Company as partial payment of the October 28 bill.
22 The company donated \)250 cash to the United Way in the company’s name.
24 The company completed work and sent a bill for \(3,950 to Alex’s Engineering Co.
25 The company sent another bill to IFM Company for the past-due amount of \)3,000.
28 The company reimbursed S. Rey in cash for business automobile mileage (1,200 miles at \(0.32 per mile).
30 The company paid \)1,750 cash for Lyn Addie’s wages for 14 days’ work.
30 The company paid $2,000 cash in dividends.
Question:(This serial problem started in Chapter 1 and continues through most of the chapters. If the Chapter 1 segment was not completed, the problem can begin at this point.)
SP 2 On October 1, 2017, Santana Rey launched a computer services company called Business Solutions, which provides consulting services, computer system installations, and custom program development. Rey adopts the calendar year for reporting purposes and expects to prepare the company’s first set of financial statements on December 31, 2017. The company’s initial chart of accounts follows.
Account No. Account No.
Cash ………………...................... 101 Common Stock ……………...... 307
Accounts Receivable ………….. 106 Dividends ………………………. 319
Computer Supplies …………….. 126 Computer Services Revenue ..403
Prepaid Insurance ……………….128 Wages Expense ………………. 623
Prepaid Rent ………………………131 Advertising Expense ………….655
Office Equipment ……………….. 163 Mileage Expense ……………… 676
Computer Equipment ……………167 Miscellaneous Expenses ……. 677
Accounts Payable ………………..201 Repairs Expense—Computer ..684
Required
2. Open ledger accounts (in balance column format) and post the journal entries from part 1 to them.
Answer each of the following questions related to international accounting standards.
b. Identify the number and usual titles of the financial statements prepared under IFRS.
Question:Prepare general journal entries for the following transactions of a new company called Pose-for-Pics. Use the following (partial) chart of accounts: Cash; Office Supplies; Prepaid Insurance; Photography Equipment; Common Stock; Photography Fees Earned; and Utilities Expense.
Aug. 1 Madison Harris, the owner, invested \(6,500 cash and \)33,500 of
photography equipment in the company in exchange for common stock.
2 The company paid \(2,100 cash for an insurance policy covering the
next 24 months.
5 The company purchased office supplies for \)880 cash.
20 The company received \(3,331 cash in photography fees earned.
31 The company paid \)675 cash for August utilities.
Roshaun Gould started a web consulting firm called Gould Solutions. He began operations and completed seven transactions in April that resulted in the following accounts, which all have normal balances.
Cash ………………………………………. \(20,000
Office supplies ……………………………….. 750
Prepaid rent ………………………………… 1,800
Office equipment …………………………. 12,250
Accounts payable ………………………… 12,250
Common stock ……………………………. 15,000
Dividends ……………………………………. 5,200
Consulting fees earned ………………….. 20,400
Miscellaneous expenses ………………….. 7,650
Required
2. The following seven transactions produced the account balances shown above.
a. Gould invested \)15,000 cash in the business in exchange for common stock.
b. Paid \(1,800 cash in advance for next month’s rent expense.
c. Paid \)7,650 cash for miscellaneous expenses.
d. Purchased office supplies for \(750 cash.
e. Purchased \)12,250 of office equipment on credit (with accounts payable).
f. Received \(20,400 cash for consulting services provided in April.
g. The company paid \)5,200 cash in dividends.
Prepare a Cash T-account, enter the cash effects (if any) of each transaction, and compute the ending Cash balance (code each entry in the T-account with one of the transaction codes athrough g).
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