Managerial Accounting
Managerial Accounting
7th Edition
ISBN: 9781260247886
Author: Wild
Publisher: MCG
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Chapter D, Problem 3PSA

Denzel Brooks opened a web consulting business called Venture Consultants and completed the following transactions in March.
Mar. 1 Brooks invested $150,000 cash along with $22,000 in office equipment in the company in exchange lor common stock.
2 The company prepaid $6,000 cash for six months’ rent for an office. Hint: Debit Prepaid Rent for $6,000.
3 The company made credit purchases of office equipment for $3,000 and office supplies for $1,200. Payment is due within 10 days.
6 The company completed services for a client and immediately received $4,000 cash.
9 The company completed a $7,500 project for a client, who must pay within 30 days.
12 The company paid $4,200 cash to settle the account payable created on March 3.
19 The company paid $5,000 cash for the premium on a 12-month insurance policy. Hint: Debit Prepaid Insurance for $5,000.
22 The company received $3,500 cash as partial payment for the work completed on March 9.
25 The company completed work for another client for $3,820 on credit.
29 The company paid a $5,100 cash dividend.
30 The company purchased $600 of additional office supplies on credit.
31 The company paid $500 cash for this month’s utility bill.

Problem D-3A
Preparing and posting journal entries; preparing a trial balance
C3 C4 A1 PI P2
Required

1. Prepare general journal entries to record these transactions (use the account titles listed in part 2).
2. Open the following ledger accounts—their account numbers are in parentheses (use the balance column format): Cash (101); Accounts Receivable (106); Office Supplies (124); Prepaid Insurance (128); Prepaid Rent (131); Office Equipment (163); Accounts Payable (201); Common Stock (307); Dividends (319); Services Revenue (403); and Utilities Expense (690). Post the journal entries from part 1 to the ledger accounts and enter the balance after each posting.
3. Prepare a trial balance as of the end of March.

Check (2] Ending balances: Cash, $136,700; Accounts Receivable, $7,820; Accounts Payable, $600

(3) Total debits, $187,920

Expert Solution
Check Mark
To determine

Concept introduction:

General Entries:

General entries are the primary records of business transactions. As we know that every business transaction need to be recorded in the books of account, but this recording starts with recording in general journal and recording in general journal is done through journal entries.

Hence, we can say that in the general entries every transaction is recorded primarily by debiting one side and by crediting other side of the business transaction.

Requirement 1:

General journal entries to record transactions.

Answer to Problem 3PSA

General Journal
Date Accounts Title & Explanation PR Debit Credit
March 1 Cash 101 $150,000
Office Equipment 163 $22,000
Common stock 307 $172,000
(For recording investment of cash and office equipment in the company in exchange of common stock)
March 2 Prepaid Rent 131 $6,000
Cash 101 $6,000
(For recording payment of rent for 12 months)
March 3 Office Equipment 163 $3,000
Office Supplies 124 $1,200
Accounts Payable 201 $4,200
(For recording credit purchase of office equipment and office supplies)
March 6 Cash 101 $4,000
Service Revenue 403 $4,000
(For recording service revenue)
March 9 Accounts Receivable 106 $7,500
Service Revenue 403 $7,500
(For recording completed services)
March 12 Accounts Payable 201 $4,200
Cash 101 $4,200
(For recording payment to accounts receivable)
March 19 Prepaid Insurance 128 $5,000
Cash 101 $5,000
(For recording prepaid insurance payment)
March 22 Cash 101 $3,500
Accounts Receivable 106 $3,500
(For recording receipt of cash from the accounts receivable)
March 25 Accounts Receivable 106 $3,820
Service Revenue 403 $3,820
(For recording completed services on credit)
March 29 Dividends 319 $5,100
Cash 101 $5,100
(For recording payment of cash dividends)
March 30 Office Supplies 124 $600
Accounts Payable 201 $600
(For recording office supplies on credit)
March 31 Utilities Expense 690 $500
Cash 101 $500
(For recording payment of utility bill)

Explanation of Solution

General Journal
Date Accounts Title & Explanation PR Debit Credit
March 1 Cash 101 $150,000
Office Equipment 163 $22,000
Common stock 307 $172,000
(For recording investment of cash and office equipment in the company in exchange of common stock)
March 2 Prepaid Rent 131 $6,000
Cash 101 $6,000
(For recording payment of rent for 12 months)
March 3 Office Equipment 163 $3,000
Office Supplies 124 $1,200
Accounts Payable 201 $4,200
(For recording credit purchase of office equipment and office supplies)
March 6 Cash 101 $4,000
Service Revenue 403 $4,000
(For recording service revenue)
March 9 Accounts Receivable 106 $7,500
Service Revenue 403 $7,500
(For recording completed services)
March 12 Accounts Payable 201 $4,200
Cash 101 $4,200
(For recording payment to accounts receivable)
March 19 Prepaid Insurance 128 $5,000
Cash 101 $5,000
(For recording prepaid insurance payment)
March 22 Cash 101 $3,500
Accounts Receivable 106 $3,500
(For recording receipt of cash from the accounts receivable)
March 25 Accounts Receivable 106 $3,820
Service Revenue 403 $3,820
(For recording completed services on credit)
March 29 Dividends 319 $5,100
Cash 101 $5,100
(For recording payment of cash dividends)
March 30 Office Supplies 124 $600
Accounts Payable 201 $600
(For recording office supplies on credit)
March 31 Utilities Expense 690 $500
Cash 101 $500
(For recording payment of utility bill)

1. When investment is made in exchange of common stock, then cash account and office equipment account will be debited and common stock account will be credited because at the time of receipt, cash account and office equipment account need to be debited. Common stock is credited because it is a liability and liability need to be credited.

2. Prepaid rent is treated as asset that is why prepaid rent account is debited while cash account will be credited because cash is gone out from business.

3. Office equipment and office supplies both are assets that is why at the time of purchase these accounts will be debited while accounts payable account will be credited because it is a liability.

4. At the time of receipt, cash account will be debited because cash comes in to business while service revenue account will be credited because revenues need to be credited.

5. When services are performed on credit then accounts receivable account is debited and service revenue account is credited.

6. At the time of payment to accounts payable, accounts payable account will be debited because liability is decreased while cash account will be credited because cash is gone out the business.

7. When insurance premium is paid for next 12 months then prepaid insurance account will be debited because it is an asset account while cash account will be credited because cash is gone out from the business.

8. At the time of cash receipt from accounts receivable, cash account is debited because cash comes in to the business while accounts receivable account is credited because balance of account receivable is decreased.

9. When dividend is paid then dividend account will be debited because it is an expense while cash account will be crdited because cash is gone out from business.

10. When utility bill is paid then utilities expense account will be debited because it is an expense while cash account will be credited because cash is gone out from the business.

Expert Solution
Check Mark
To determine

Concept introduction:

General Entries:

General entries are the primary records of business transactions. As we know that every business transaction need to be recorded in the books of account, but this recording starts with recording in general journal and recording in general journal is done through journal entries.

Hence, we can say that in the general entries every transaction is recorded primarily by debiting one side and by crediting other side of the business transaction.

Requirement 2:

Ledger accounts.

Answer to Problem 3PSA

Cash Account No. 101
Date PR Debit Credit Balance
March 1 G1 $150,000 $150,000
March 2 G1 $6,000 $144,000
March 6 G1 $4,000 $148,000
March 12 G1 $4,200 $143,800
March 19 G1 $5,000 $138,800
March 22 G1 $3,500 $142,300
March 29 G1 $5,100 $137,200
March 31 G1 $500 $136,700
Accounts Receivable Account No. 106
Date PR Debit Credit Balance
March 9 G1 $7,500 $7,500
March 22 G1 $3,500 $4,000
March 25 G1 $3,820 $7,820
Office Supplies Account No. 124
Date PR Debit Credit Balance
March 3 G1 $1,200 $1,200
March 30 G1 $600 $1,800
Prepaid Insurance Account No. 128
Date PR Debit Credit Balance
March 19 G1 $5,000 $5,000
Prepaid Rent Account No. 131
Date PR Debit Credit Balance
March 2 G1 $6,000 $6,000
Office Equipment Account No. 163
Date PR Debit Credit Balance
March 1 G1 $22,000 $22,000
March 3 G1 $3,000 $25,000
Accounts Payable Account No. 201
Date PR Debit Credit Balance
March 3 G1 $4,200 $4,200
March 12 G1 $4,200 $0
March 30 G1 $600 $600
Common Stock Account No. 307
Date PR Debit Credit Balance
March 1 G1 $172,000 $172,000
Dividends Account No. 319
Date PR Debit Credit Balance
March 29 G1 $5,100 $5,100
Service Revenue Account No. 403
Date PR Debit Credit Balance
March 6 G1 $4,000 $4,000
March 9 G1 $7,500 $11,500
March 25 G1 $3,820 $15,320
Utilities Expense Account No. 690
Date PR Debit Credit Balance
March 31 G1 $500 $500

Explanation of Solution

Cash Account No. 101
Date PR Debit Credit Balance
March 1 G1 $150,000 $150,000
March 2 G1 $6,000 $144,000
March 6 G1 $4,000 $148,000
March 12 G1 $4,200 $143,800
March 19 G1 $5,000 $138,800
March 22 G1 $3,500 $142,300
March 29 G1 $5,100 $137,200
March 31 G1 $500 $136,700

As we know that in case of cash account debit side increase the ending balance while credit side decrease the ending balance.

Accounts Receivable Account No. 106
Date PR Debit Credit Balance
March 9 G1 $7,500 $7,500
March 22 G1 $3,500 $4,000
March 25 G1 $3,820 $7,820

As we know that in case of accounts receivable account debit side increase the ending balance while credit side decrease the ending balance of this account.

Office Supplies Account No. 124
Date PR Debit Credit Balance
March 3 G1 $1,200 $1,200
March 30 G1 $600 $1,800

As we know that in case of office supplies account debit side increase the ending balance while credit side decrease the ending balance of this account.

Prepaid Insurance Account No. 128
Date PR Debit Credit Balance
March 19 G1 $5,000 $5,000

As we know that in case of prepaid insurance account debit side increase the ending balance while credit side decrease the ending balance of this account.

Prepaid Rent Account No. 131
Date PR Debit Credit Balance
March 2 G1 $6,000 $6,000

As we know that in case of prepaid rent account debit side increase the ending balance while credit side decrease the ending balance of this account.

Office Equipment Account No. 163
Date PR Debit Credit Balance
March 1 G1 $22,000 $22,000
March 3 G1 $3,000 $25,000

As we know that in case of office equipment account debit side increase the ending balance while credit side decrease the ending balance of this account.

Accounts Payable Account No. 201
Date PR Debit Credit Balance
March 3 G1 $4,200 $4,200
March 12 G1 $4,200 $0
March 30 G1 $600 $600

As we know that in case of accounts payable account credit side increase the ending balance while debit side decrease the ending balance of this account.

Common Stock Account No. 307
Date PR Debit Credit Balance
March 1 G1 $172,000 $172,000

As we know that in case of common stock account credit side increase the ending balance while debit side decrease the ending balance of this account.

Dividends Account No. 319
Date PR Debit Credit Balance
March 29 G1 $5,100 $5,100

As we know that in case of dividend account debit side increase the ending balance while credit side decrease the ending balance of this account because it is an expense.

Service Revenue Account No. 403
Date PR Debit Credit Balance
March 6 G1 $4,000 $4,000
March 9 G1 $7,500 $11,500
March 25 G1 $3,820 $15,320

As we know that in case of service account credit side increase the ending balance while debit side decrease the ending balance of this account.

Utilities Expense Account No. 690
Date PR Debit Credit Balance
March 31 G1 $500 $500

As we know that in case of utilities expense account debit side increase the ending balance while credit side decrease the ending balance of this account because it is an expense.

Expert Solution
Check Mark
To determine

Concept introduction:

General Entries:

General entries are the primary records of business transactions. As we know that every business transaction need to be recorded in the books of account, but this recording starts with recording in general journal and recording in general journal is done through journal entries.

Hence, we can say that in the general entries every transaction is recorded primarily by debiting one side and by crediting other side of the business transaction.

Requirement 3:

Trial balance as of the end of March.

Answer to Problem 3PSA

Trial Balance
As on March 31
Debit Credit
Cash $136,700
Accounts receivable $7,820
Office supplies $1,800
Prepaid insurance $5,000
Prepaid rent $6,000
Office equipment $25,000
Accounts payable $600
Common stock $172,000
Dividends $5,100
Service revenue $15,320
Utilities expense $500
Totals $187,920 $187,920

Explanation of Solution

1. All expenses and losses have debit balance, that is why these are shown in the debit column of the trial balance.

2. All revenues and gains have credit balance, that is why these are shown in the credit column of the trial balance.

3. All assets have debit balance, that is why these are shown in the debit column of the trial balance.

4. Liabilities and equity have credit balance, that is why these are shown in the credit column of the trial balance.

Trial Balance
As on March 31
Debit Credit
Cash $136,700
Accounts receivable $7,820
Office supplies $1,800
Prepaid insurance $5,000
Prepaid rent $6,000
Office equipment $25,000
Accounts payable $600
Common stock $172,000
Dividends $5,100
Service revenue $15,320
Utilities expense $500
Totals $187,920 $187,920

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Chapter D Solutions

Managerial Accounting

Ch. D - Prob. 11DQCh. D - Prob. 12DQCh. D - Prob. 13DQCh. D - Define (a) assets, (b) liabilities, and (c) equityCh. D - Prob. 15DQCh. D - Review the Apple balance sheet Appendix A....Ch. D - Review the Google balance sheet in Appendix A....Ch. D - Prob. 18DQCh. D - Identify the items from the following list that...Ch. D - Prob. 2QSCh. D - Prob. 3QSCh. D - Identify the normal balance (debit or credit) for...Ch. D - Prob. 5QSCh. D - Prob. 6QSCh. D - Prob. 7QSCh. D - A trial balance has total debits of $20,000 and...Ch. D - Prob. 9QSCh. D - Prob. 10QSCh. D - Prob. 11QSCh. D - Prob. 12QSCh. D - Prob. 13QSCh. D - Prob. 14QSCh. D - Prob. 15QSCh. D - Order the following steps in the accounting...Ch. D - Prob. 2ECh. D - Enter the number for the item that best completes...Ch. D - For each of the following, (1) identify the type...Ch. D - Prob. 5ECh. D - Prob. 6ECh. D - Prepare general journal entries for the following...Ch. D - Prob. 8ECh. D - Prob. 9ECh. D - Prob. 10ECh. D - Prob. 11ECh. D - 1. Prepare general journal entries for the...Ch. D - Prob. 13ECh. D - Prob. 14ECh. D - A corporation had the following assets and...Ch. D - Carmen Camry operates a consulting firm called...Ch. D - Prob. 17ECh. D - Prob. 18ECh. D - Prob. 19ECh. D - Prob. 20ECh. D - You are told the column totals in a trial balance...Ch. D - Exercise D-22 Calculating and interprets the debt...Ch. D - Prob. 23ECh. D - Prob. 1PSACh. D - Prob. 2PSACh. D - Denzel Brooks opened a web consulting business...Ch. D - Prob. 4PSACh. D - The accounting records of Nettle Distribution show...Ch. D - Prob. 6PSACh. D - Prob. 7PSACh. D - Prob. 1PSBCh. D - Prob. 2PSBCh. D - Prob. 3PSBCh. D - Prob. 4PSBCh. D - Prob. 5PSBCh. D - Prob. 6PSBCh. D - Prob. 7PSBCh. D - Prob. 1SPCh. D - Prob. 2SPCh. D - Prob. 3SPCh. D - Prob. 1GLPCh. D - Prob. 2GLPCh. D - Prob. 3GLPCh. D - Prob. 4GLPCh. D - Prob. 5GLPCh. D - Prob. 6GLPCh. D - Prob. 7GLPCh. D - Using transactions from the following assignments...Ch. D - Prob. 1AACh. D - Prob. 2AACh. D - Prob. 3AACh. D - Prob. 1BTNCh. D - Prob. 2BTNCh. D - Prob. 3BTNCh. D - The expanded accounting equation consists of...Ch. D - Prob. 5BTNCh. D - Prob. 6BTNCh. D - Prob. 7BTN
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