Question

P2-63. Recording Transactions in Journal Entries and T-Accounts

Use the information in Problem 2-62 to complete the following requirements. (P2-62 solution below)

REQUIRED

a. Prepare journal entries for each of the transactions 1 through 12.

b. Set up T-accounts for each of the accounts used in part a and post the journal entries to those

T-accounts.

Solution for P2-62

(a) Financial statements effects template:

		Balance sheet										Income Statement
SNo	Transaction	Current Assets	+	Non Current Assets	=	Liabilities	+	Contribution Capital	+	Earned Capital		Revenues	-	Expenses	=	Net Income
1	Issued common stock for 50,000 cash	50,000						50,000
		(Cash)						(equity shares)
2	Paid 4,800 cash for rent	-4,800								-4,800			-	4,800		-4,800
		(Cash)								(Retained earnings)				(Rent expense)
3	Received invoice for 1,600 for entertaining resort owners					1,600				-1,600			-	1,600		-1,600
						(Accounts Payable)				(Retained earnings)				(Entertainment expense)
4	Paid 900 cash for adverstising for June	-900								-900			-	900		-900
		(Cash)								(Retained earnings)				(Advertising Expense)
5	Paid 1,800 cash Insurance Premium for July	0
		(Cash = -1,800 and Prepaid Insurance = +1800)
6	Rendered Flight Services For 22,700 cash	22,700								22,700		22,700				22,700
		(Cash)								(Retained earnings)		(Flight Services Revenue)
7	Billed Client 2,900 for transporting personnel and Billed firms for 13,000 in flight services	15,900								15,900		15,900				15,900
		(Accounts Receivable)								(Retained earnings)		(Flight Services Revenue)
8	Paid 1500 cash to cover accounts payable	-1,500				-1,500
		(Cash)				(Accounts Payable)
9	Received 13,200 on account from clients in transaction 7	0
		(Cash = +13,200 and Accounts receivables = -13,200)
10	Paid 16,000 cash to cover June wages	-16,000								-16,000			-	16,000		-16,000
		(Cash)								(Retained earnings)				(Wages Expense)
11	Received 3,500 invoice for cost of fuel used during June					3,500				-3,500			-	3,500		-3,500
						(Accounts Payable)				(Retained earnings)				(Fuel Expense)
12	Declared and paid a 3,000 cash dividend	-3,000						-3,000
		(Cash)						(Dividend paid)
	Total	62,400	+	0	=	3,600	+	47,000	+	11,800		38,600	-	26,800	=	11,800

(b) Income Statement for the month of June:

Particulars	Description		Amount ($)
Revenue	(22,700+2,900+13,000)		38,600
-Cost of Goods Sold
	Wages Expense	16,000
	Fuel Expense	3,500	-19,500
Gross Profit			19,100
-Operating expenses
	Rent Expense	4,800
	Entertainment Expense	1,600
	Advertising Expense	900	-7,300
+Oerating income			0
-Taxes			0
Net Profit/Income			11,800

Answer 1

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Part a
Date	Accounts	Debit	Credit
1	Cash	$             50,000
1	Common Stock		$                         50,000
	(Issued common stock)
2	Rent Expense	$               4,800
2	Cash		$                           4,800
	(being rent paid)
3	Entertainment Expense	$               1,600
3	Accounts Payable		$                           1,600
	(Being entertainment expense incurred)
4	Advertising Expense	$                   900
4	Cash		$                               900
	(Being advertising expense paid)
5	Prepaid Insurance	$               1,800
5	Cash		$                           1,800
	(being insurance premium paid)
6	Cash	$             22,700
6	Service Revenue-Flight		$                         22,700
	(being cash received for service provided)
7	Accounts Receivable	$             15,900
7	Service Revenue-Transporting		$                           2,900
7	Service Revenue-in Flight		$                         13,000
	(being service provided on account)
8	Accounts Payable	$               1,500
8	Cash		$                           1,500
	(being amount paid to creditors)
9	Cash	$             13,200
9	Accounts Receivable		$                         13,200
	(being amount reiceved from debtors)
10	Wages Expenses	$             16,000
10	Cash		$                         16,000
	(being wages paid for june)
11	Fuel Expense	$               3,500
11	Accounts Payable		$                           3,500
	(being fuel exp incurred)
12	Dividends	$               3,000
12	Cash		$                           3,000
	(being dividend paid)

Part b T Accounts:
Cash
Debit		Credit
1	$ 50,000	2	$    4,800
6	$ 22,700	4	$       900
9	$ 13,200	5	$    1,800
		8	$    1,500
		10	$ 16,000
		12	$    3,000
Ending Balance	$ 57,900
Accounts Receivable
Debit		Credit
7	$ 15,900	9	$ 13,200
Ending Balance	$    2,700
Prepaid Insurance
Debit		Credit
5	$    1,800
Ending Balance	$    1,800
Accounts Payable
Debit		Credit
8	$    1,500	3	$    1,600
		11	$    3,500
		Ending Balance	$    3,600
Common Stock
Debit		Credit
		1	$ 50,000
		Ending Balance	$ 50,000
Dividends
Debit		Credit
12	$    3,000
Ending Balance	$    3,000
Advertising Expense
Debit		Credit
4	$       900
Ending Balance	$       900
Entertanement Expense
Debit		Credit
3	$    1,600
Ending Balance	$    1,600
Fuel Expense
Debit		Credit
11	$    3,500
Ending Balance	$    3,500
Rent Expense
Debit		Credit
2	$    4,800
Ending Balance	$    4,800
Wages Expense
Debit		Credit
10	$ 16,000
Ending Balance	$ 16,000
Servic Revenue
Debit		Credit
		6	$ 22,700
		7	$ 13,000
		7	$    2,900
		Ending Balance	$ 38,600