Question

Aracel Engineering completed the following transactions in the month of June. a. Jenna Aracel, the owner, invested $155,000 cash, office equipment with a value of $5,700, and $74,000 of drafting equipment to launch the company. b. The company purchased land worth $58,000 for an office by paying $7,900 cash and signing a long-term note payable for $50,100. c. The company purchased a portable building with $52,000 cash and moved it onto the land acquired in b. d. The company paid $4,000 cash for the premium on an 18- month Insurance policy. e. The company completed and delivered a set of plans for a client and collected $8,500 cash. 1. The company purchased $20,000 of additional drafting equipment by paying $9,600 cash and signing a long-term note payable for $10,400 9. The company completed $14,000 of engineering services for a client. This amount is to be received in 30 days. n. The company purchased $1,750 of additional office equipment on credit. I. The company completed engineering services for $22.000 on credit. J. The company received a bill for rent of equipment that was used on a recently completed job. The $1,413 rent cost must be paid within 30 days. k. The company collected $7.000 cash in partial payment from the client described in transaction g. 1. The company paid $1,400 cash for wages to a drafting assistant. n. The company paid $1,750 cash to settle the account payable created in transaction n. n. The company paid $1,070 cash for minor maintenance of its drafting equipment. o. Jenna Aracel withdrew $9,150 cash from the company for personal use. p. The company paid $2,200 cash for wages to a drafting assistant 9. The company paid $3,800 cash for advertisements on the Web during June. Required: 1. Prepare general Journal entries to record these transactions using the following titles: Cash (101): Accounts Receivable (106); Prepaid Insurance (108): Office Equipment (163); Drafting Equipment (164) Building (1701: Land (172); Accounts Payable (201) Notes Payable (250); J. Aracel, Capital (301): J. Aracel, Withdrawals (302); Engineering Fees Eamed (402): Wages Expense (601); Equipment Rental Expense (602); Advertising Expense (603); and Repairs Expense (604). 2. Post the journal entries from part 1 to the ledger accounts. 3. Prepare a trial balance as of the end of June.

Answer 1

Answer -

1. Answer -

Transaction	Account titles	Debit	Credit
a.	Cash	$155,000
	Office equipment	$5,700
	Drafting equipment	$74,000
	J. Aracel, capital		$234,700
b.	Land	$58,000
	Cash		$7,900
	Notes payable		$50,100
c.	Building	$52,000
	Cash		$52,000
d.	Prepaid insurance	$4,000
	Cash		$4,000
e.	Cash	$8,500
	Engineering fees earned		$8,500
f.	Drafting equipment	$20,000
	Cash		$9,600
	Notes payable		$10,400
g.	Accounts receivable	$14,000
	Engineering fees earned		$14,000
h.	Office equipment	$1,750
	Accounts payable		$1,750
i.	Accounts receivable	$22,000
	Engineering fees earned		$22,000
j.	Equipment rental expense	$1,413
	Accounts payable		$1,413
k.	Cash	$7,000
	Accounts receivable		$7,000
l.	Wages expense	$1,400
	Cash		$1,400
m.	Accounts payable	$1,750
	Cash		$1,750
n.	Repairs expense	$1,070
	Cash		$1,070
o.	J. Aracel, withdrawals	$9,150
	Cash		$9,150
p.	Wages expense	$2,200
	Cash		$2,200
q.	Advertising expense	$3,800
	Cash		$3,800

Calculation:

Transaction (a):

J. Aracel, capital = Cash + Office equipment + Drafting equipment

= $155000 + $5700 + $74000

= $234700

Note: Assets and expenses are debited when they are increases and credited when they are decreases. Liabilities, owner equity, and revenue are credited when they are increases and debited when they are decreases.

Here,

Cash, accounts receivable, office equipment, drafting equipment, land, building and prepaid insurance are asset accounts. Accounts payable and notes payable are liability accounts. J. Aracel, capital is an owner equity account. Engineering fees earned is a revenue account. And wages expense, advertising expense, repairs expense and equipment rental expense are expense accounts.

2. Answer -

101: Cash
Transaction	Debit	Credit	Balance
a.	$155,000		$155,000
b.		$7,900	$147,100
c.		$52,000	$95,100
d.		$4,000	$91,100
e.	$8,500		$99,600
f.		$9,600	$90,000
k.	$7,000		$97,000
l.		$1,400	$95,600
m.		$1,750	$93,850
n.		$1,070	$92,780
o.		$9,150	$83,630
p.		$2,200	$81,430
q.		$3,800	$77,630

Calculation:

Balance = $155000 - $7900 - $52000 - $4000 + $8500 - $9600 + $7000 - $1400 - $1750 - $1070 - $9150 - $2200 - $3800 = $77360

106: Accounts receivable
Transaction	Debit	Credit	Balance
g.	$14,000		$14,000
i.	$22,000		$36,000
k.		$7,000	$29,000

Calculation:

Balance = $14000 + $22000 - $7000 = $29000

108: Prepaid insurance
Transaction	Debit	Credit	Balance
d.	$4,000		$4,000

163: Office equipment
Transaction	Debit	Credit	Balance
a.	$5,700		$5,700
h.	$1,750		$7,450

Calculation:

Balance = $5700 + $1750 = $7450

164: Drafting equipment
Transaction	Debit	Credit	Balance
a.	$74,000		$74,000
f.	$20,000		$94,000

Calculation:

Balance = $74000 + $20000 = $94000

170: Building
Transaction	Debit	Credit	Balance
c.	$52,000		$52,000

172: Land
Transaction	Debit	Credit	Balance
b.	$58,000		$58,000

201: Accounts payable
Transaction	Debit	Credit	Balance
h.		$1,750	$1,750
j.		$1,413	$3,163
m.	$1,750		$1,413

Calculation:

Balance = $1750 + $1413 - $1750 = $1413

250: Notes payable
Transaction	Debit	Credit	Balance
b.		$50,100	$50,100
f.		$10,400	$60,500

Calculation:

Balance = $50100 + $10400 = $60500

301: J. Aracel, capital
Transaction	Debit	Credit	Balance
a.		$234,700	$234,700

302: J. Aracel, withdrawals
Transaction	Debit	Credit	Balance
o.	$9,150		$9,150

402: Engineering fees earned
Transaction	Debit	Credit	Balance
e.		$8,500	$8,500
g.		$14,000	$22,500
i.		$22,000	$44,500

Calculation:

Balance = $8500 + $14000 + $22000 = $44500

601: Wages expense
Transaction	Debit	Credit	Balance
l.	$1,400		$1,400
p.	$2,200		$3,600

Calculation:

Balance = $1400 + $2200 = $3600

602: Equipment rental expense
Transaction	Debit	Credit	Balance
j.	$1,413		$1,413

603: Advertising expense
Transaction	Debit	Credit	Balance
q.	$3,800		$3,800

604: Repairs expense
Transaction	Debit	Credit	Balance
o.	$1,070		$1,070

3. Answer -

Aracel Engineering
Trial Balance
June 30
	Debit	Credit
Cash	$77,630
Accounts receivable	$29,000
Prepaid insurance	$4,000
Office equipment	$7,450
Drafting equipment	$94,000
Building	$52,000
Land	$58,000
Accounts payable		$1,413
Notes payable		$60,500
J. Aracel, capital		$234,700
J. Aracel, withdrawals	$9,150
Engineering fees earned		$44,500
wages expense	$3,600
Equipment rental expense	$1,413
Advertising expense	$3,800
Repairs expense	$1,070
Total	$341,113	$341,113

Calculation:

Debit side total:

= Cash + Accounts receivable + Prepaid insurance + Office equipment + Drafting equipment + Building + Land + J. Aracel, withdrawals + Wages expense + Equipment rental expense + Advertising expense + Repairs expense

= $77630 + $29000 + $4000 + $7450 + $94000 + $52000 + $58000 + $9150 + $3600 + $1413 + $3800 + $1070

= $341113

Credit side total:

= Accounts payable + Notes payable + J. Aracel, capital + Engineering fees earned

= $1413 + $60500 + $234700 + $44500

= $341113