Question

A sole proprietorship has the following transactions: The business received $20,000 cash from the owner in exchange for capital. The business purchases $600 of office supplies on account. The business purchases $3,000 of furniture on account. The business performs services to various clients totaling $11,000 on account. The business pays out $3,000 for salaries expense and $4,500 for rent expense. The business pays $600 to a supplier for the office supplies purchased earlier. The business collects $2,000 from one of its clients for services rendered earlier in the month. At the end of the month, all journal entries are posted to the ledger. Accounts Payable will appear as which of the following? OA. Accounts Payable 600 3,000 600 4,200 Bal. ОВ. Accounts Payable 600 3,000 3,600 Bal. O c. Accounts Payable 600 600 3,000 3,000 Bal.

Answer 1

Answer: C.

Accounts payable
600	600
	3,000
	3,000 Balance

Expalnation:

Among those transactions, accounts payable is affected by only three transactions. Journal entry for that three transactions are:

Transaction	Account title	Debit($)	Credit($)
2	Office supplies	600
	Accounts payable		600
	(purchased supplies on account for $600)
3	Furniture	3,000
	Accounts payable		3,000
	(purchased furniture on account for $3,000)
6	Accounts payable	600
	Cash		600
	(paid cash $600 for office supplies purchased)

Since accounts payable is a liability, it has credit balance. When office supplies and furniture was purchased on account, its balance was $3,600 credit. But when cash is paid for office supplies purchased, the liability; accounts payable has decreased by $600. Now it has a credit balance of $3,000 as we see in the ledger shown in the answer.

For a reference, journal entries for other transactions are given below

Transaction	Account title	Debit	Credit
1.	Cash	20,000
	Capital		20,000
	(received cash in exchange of capital)
4	Accounts receivable	11,000
	Service revenue		11,000
	(services performed to clients on credit / on account)
5	Salary expense	3,000
	Rent expense	4,500
	Cash		7,500
	(salary and rent paid)
7	Cash	2,000
	Acounts receivable		2,000
	(got cash from one of the client who received service earlier)