Financial Accounting I

Chapter 2
Problem 1:
Travco Group transactions during January 2015 were as follows:
 Jan. 1: Travco Group officially started its business activity with a capital of L.E 5,000,000.
Travco opened a bank account in the name of the Group, and deposited the amount received.
 Jan. 5: Travco purchased a piece of land in Zayed City for L.E 1,000,000 cash to be
used as buses garage.
 Jan. 10: Travco purchased from Cairo governorate an old garage building located in El Tahrir
Square for L.E 1,000,000. Travco made cash deposit down payment of L.E 600,000 and
issued a 50-day note payable for the rest of the amount.
 Jan. 13: Travco purchased 10 buses on credit from Ghabbour Auto for total cost of L.E
2,000,000 due within 60 days.
 Jan. 15: Travco purchased some equipment for L.E 100,000 on account from Alex.
Company.
 Jan. 17: Travco sold 2 of its new buses to Juhayna for L.E 400,000. Juhayna made no down
payment but agreed to pay the amount due within 40 days.
 Jan. 19: Travco purchased some office supplies for L.E 30,000 cash.
 Jan. 20: Travco provided transportation services for L.E 50,000 to Cairo Company on
account.
 Jan. 21: Travco received L.E 150,000 cash from Juhayna as partial settlement of its
accounts receivable.
 Jan. 22: Travco made a partial payment of L.E 200,000 to Ghabbour Auto of its accounts
payable.
 Jan. 23: Travco provided transportation services for L.E 30,000 to Cairo University and
received a 40-day note receivable.
 Jan. 25: Travco received L.E 50,000 cash for transportation services provided to its
customers during the month.
 Jan. 26: Travco paid L.E 10,000 as monthly rent for one of its warehouses. Jan.
 27: Travco obtained a loan from CIB bank for L.E 1,000,000 and deposited it in its bank
account.
 Jan. 28: Travco paid L.E 400,000 to the governorate of its notes payable.
 Jan. 30: Travco paid L.E 70,000 cash as salaries expense.
 Jan. 31: One of the owners of Travco withdrew L.E 200,000 cash for his personal use.
Required:
1. Journalize the proceeding January transactions in the General Journal.

Travco Group
General Journal
January 1 - 31, 2015
Date Account Title and Explanations Debit Credit
2015 Cash 5,000,000
Jan. 1 Capital 5,000,000
(Investing cash in business)
Jan. 5 Land 1,000,000
Cash 1,000,000
(Purchasing land in cash)
Jan. 10 Building 1,000,000
Cash 600,000
Notes Payable 400,000
(Purchasing building a part in cash and signed a note for the rest)
Jan. 13 Buses 2,000,000
Accounts Payable 2,000,000
(Purchasing buses on account)
Jan. 15 Equipment 100,000
Accounts Payable 100,000
(Purchasing equipments on account)
Jan. 17 Accounts Receivable 400,000
Buses 400,000
(Selling buses on account)
Jan. 19 Office supplies 30,000
Cash 30,000
(Purchasing office supplies in cash)
Jan. 20 Accounts Receivable 50,000
Transportation Services Revenue 50,000
(Providing services on account)
Jan. 21 Cash 150,000
Accounts Receivable 150,000
(Receiving a partial settlement of its accounts receivable)
Jan. 22 Accounts Payable 200,000
Cash 200,000
(Partial payment of accounts payable)
Jan. 23 Notes Receivable 30,000
Transportation Services Revenue 30,000

(Providing services for notes receivable)

Jan. 25 Cash 50,000
Transportation Services Revenue 50,000
(Receiving services revenue in cash)
Jan. 26 Rent Expense 10,000
Cash 10,000
(Payment of rent expense in cash)
Jan. 27 Cash 1,000,000
Loan 1,000,000
(Obtaining a bank loan and deposited it in cash)
Jan. 28 Notes Payable 400,000
Cash 400,000
(Payment of notes payable)
Jan. 30 Salaries Expense 70,000
Cash 70,000
(Payment of salaries expense in cash)
Jan. 31 Withdrawals (Owner's Drawings) 200,000
Cash 200,000
(Owners' drawings in cash)
2. Post to the cash, capital and accounts receivable ledgers only using the T form account,
and compute its balance.

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Problem 2:
Journalize the following transactions for Tanaka Company for June 2016, the company’s first
month of operations. You may omit explanations for the transactions.
1. Purchased equipment on account for $9,800.
2. Billed customers $5,600 for services performed.
3. Made payment of $2,400 on account for equipment purchased earlier in month.
4. Collected $3,900 on customer accounts.

Solution:
1. Equipment 9,800
Accounts Payable 9,800

2. Accounts Receivable 5,600

Service Revenue 5,600

3. Accounts Payable 2,400

Cash 2,400

4. Cash 3,900
Accounts Receivable 3,900

Problem 3:
Post the following transactions to T-accounts and determine each account’s ending balance.
1. Supplies .............................................................................................. 2,600
Accounts Payable ...................................................................... 2,600

2. Accounts Receivable .......................................................................... 4,300

Service Revenue........................................................................ 4,300

3. Cash ................................................................................................... 3,500

Accounts Receivable ................................................................. 3,500

4. Accounts Payable ............................................................................... 1,200

Cash........................................................................................... 1,200

Solution
Cash Accounts Payable

3. 3,500 4. 1,200 4. 1,200 1. 2,600

Bal. 2,300 Bal. 1,400

Accounts Receivable Service Revenue

2. 4,300 3. 3,500 2. 4,300

Bal. 800 Bal. 4,300

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 Supplies

1. 2,600

Bal. 2,600

Problem 4:
The transactions of the Litehouse Realty are recorded in the general journal below. You are to
post the journal entries to T-accounts.

General Journal
______________________________________________________________________________
Date Account Titles Debit Credit
______________________________________________________________________________
2016
Aug. 5 Accounts Receivable 4,600
Service Revenue 4,600

10 Cash 3,200
Service Revenue 3,200

19 Rent Expense 1,300

Cash 1,300

25 Cash 1,500
Accounts Receivable 1,500

Solution:

General Ledger

Cash Accounts Receivable

8/10 3,200 8/19 1,300 8/5 4,600 8/25 1,500
8/25 1,500

8/31 Bal. 3,400 8/31 Bal. 3,100

Service Revenue Rent Expense

8/5 4,600 8/19 1,300
8/10 3,200
8/31 Bal. 7,800 8/31 Bal. 1,300

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Problem 5:
Prepare a trial balance from the ledger accounts of Black Diamond Express as of January 31, 2016.

Accounts Payable $ 1,100 Rent Expense $ 500

Accounts Receivable 1,700 Service Revenue 3,000
Cash 1,400 Supplies 200
Owner’s Capital 2,000 Salaries and Wages Expense 1,300
Owner’s Drawings 1,000

Solution:

BLACK DIAMOND EXPRESS

Trial Balance
January 31, 2016

Debit Credit
Cash $ 1,400
Accounts Receivable 1,700
Supplies 200
Accounts Payable $ 1,100
Owner’s Capital 2,000
Owner’s Drawings 1,000
Service Revenue 3,000
Rent Expense 500
Salaries and Wages Expense 1,300
$6,100 $6,100

Problem 7:
L. Phair and Associates is a financial planning service. The account balances at December 31, 2016 are
shown by the following alphabetical list:

Accounts Payable $ 5,000

Accounts Receivable 19,000
Buildings 140,000
Cash 11,700
Equipment 31,300
Land 42,000
Owner’s Capital 152,900
Notes Payable 95,000
Notes Receivable 8,100
Supplies 800

Instructions

Prepare a trial balance with the accounts arranged in financial statement order.

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Solution:
L. PHAIR AND ASSOCIATES

Trial Balance

December 31, 2016

Debit Credit

Cash ............................................................................................................ $ 11,700

Accounts Receivable ................................................................................... 19,000

Notes Receivable ........................................................................................ 8,100

Supplies ....................................................................................................... 800

Equipment ................................................................................................... 31,300

Buildings ..................................................................................................... 140,000

Land ............................................................................................................ 42,000

Notes Payable.............................................................................................. $ 95,000

Accounts Payable ........................................................................................ 5,000

Owner’s Capital .......................................................................................... 152,900

Totals ................................................................................................. $252,900 $252,900