Demonstration Problem

Chapter 2
The Demonstration Problem below includes an Action Plan and electronic Working Papers (in Excel). Download
the Working Papers and complete the problem, using the Action Plan (be sure to save your work). Once you've
completed the problem, you can compare to the Solution, also available below.

Problem 1
Selected transactions for R. Song, an interior decorator, in her first month of business are as follows:

Jan. 2 Ruija Song invested $10,000 cash in her business.

3 Purchased a used car for $3,000 cash for use in business.

9 Purchased supplies on account for $600.

11 Billed customers $2,400 for services provided.

16 Paid $350 cash for advertising.

20 Received $900 cash from customers billed on January 11.

23 Paid $300 cash on balance owed from January 9 transaction.

28 Owner withdrew $1,000 cash for personal use.

31 Collected $800 cash in advance for a decorating contract to be provided February 10.

Instructions
For each transaction, indicate the following:

a. The basic type of account debited and credited (Asset, Liability, Owner's Equity).
b. The specific account debited and credited (Cash, Rent Expense, Service Revenue, etc.).
c. Whether the specific account is increasing or decreasing.
d. The normal balance of the specific account.

Use the following format, in which the January 2 transaction is given as an example.
 Account Debited Account Credited

(a) (b) (c) (d) (a) (b) (c) (d)

Basic Specific Normal Basic Specific Normal

Date Type Account Effect Balance Type Account Effect Balance

Jan Asset Cash Increase Debit Owner's R. Song, Increase Credit

2 Equity Capital

Action Plan

Analyze the accounts being adjusted in each transaction.

Determine which account is being debited and which account is being credited.
For each account that is being adjusted, determine which basic account type it is: Asset, Liability, or
Owner's Equity.
Determine the actual account name that will be debited or credited. Accounts names are specific
names like Cash, Accounts Payable, Service Revenue, and Rent Expense.
Determine if the transaction will be increasing or decreasing the balance of the specific account.
Based on the basic type of account (in the third point above) determine if the normal balance is a
debit or credit.

Download Working Papers (Excel Spreadsheet) (ch02_d1_worksheet.xls)

Next: View the Solution ([Link])

Demonstration Problem

Chapter 2

Problem 1: Solution
Account Debited Account Credited

(a) (b) (c) (d) (a) (b) (c) (d)

Basic Specific Normal Basic Specific Normal

Date Type Account Effect Balance Type Account Effect Balance

Jan Asset Cash Increase Debit Owner's R. Song, Increase Credit

2 Equity Capital

3 Asset Vehicles Increase Debit Asset Cash Decrease Debit

9 Asset Supplies Increase Debit Liability Accounts Increase Credit

Payable

11 Asset Accounts Increase Debit Owner's Service Increase Credit

Receivable Equity Revenue

16 Owner's Advertising Increase Debit Asset Cash Decrease Debit

Equity Expense

20 Asset Cash Increase Debit Asset Accounts Decrease Debit

Receivable

23 Liability Accounts Decrease Credit Asset Cash Decrease Debit

Payable

28 Owner's R. Song, Increase Debit Asset Cash Decrease Debit

Equity Drawings

31 Asset Cash Increase Debit Liability Unearned Increase Credit

Revenue

Back: Problem 1 ([Link])

Demonstration Problem

Chapter 2
The Demonstration Problem below includes an Action Plan and electronic Working Papers (in Excel). Download
the Working Papers and complete the problem, using the Action Plan (be sure to save your work). Once you've
completed the problem, you can compare to the Solution, also available below.

Problem 2
Thind Security Company provides security services. Selected transactions for Thind are presented below.

Oct. 1 Rasna Thind invested $66,000 cash in the business.

2 Hired a part-time security consultant. Salary will be $2,000 per month and the employee's first day
of work will be October 16.

2 Paid $500 for advertising for this month.

3 Paid the $185 monthly insurance premium.

4 Paid October rent, $950.

7 Purchased equipment for $18,000, paying $4,000 cash and signing a note payable for the balance.

10 Received the bill for equipment repair costs of $390. This is due on November 5.

12 Provided security services for an event for $3,200 on account.

16 Purchased supplies for $410 on account.

24 Received and paid the October utility bill for $148.

26 Received the payment in full from the client billed in the October 12 transaction.

26 Provided security services to a client and collected $550 cash.

28 Collected a $1,400 cash advance for a security contract that begins on November 1.

29 Received the October telephone bill for $175. It will be paid in November.

30 Paid the balance due for the purchase of supplies on October 16.

31 Made a $580 payment on the note payable. Of this amount, $80 is interest and the remainder is a
principal repayment on the note payable.

31 Paid Rasna, the owner, $2,500 cash for her personal use.

31 Paid the employee salary of $1,000.

Instructions
Prepare the journal entries to record each of the events listed.

Action Plan

Separate journal entries are made for each transaction.

In journalizing, make sure debits equal credits.
Provide an appropriate description of each journal entry.

Download Working Papers (Excel Spreadsheet) (ch02_d2_worksheet.xls)

Next: View the Solution ([Link])

Demonstration Problem

Chapter 2

Problem 2: Solution
GENERAL JOURNAL J1

Date Account Titles and Explanation Debit Credit

Oct 1 Cash 66,000

R. Thind, Capital 66,000

Invested cash in business.

2 No entry – not a transaction.

2 Advertising Expense 500

Cash 500

Paid for October advertising.

3 Insurance Expense 185

Cash 185

Paid the October insurance premium.

4 Rent Expense 950

Cash 950

Paid the October office rent.

7 Equipment 18,000

Cash 4,000

Notes Payable 14,000

Purchased furniture with down payment.

 GENERAL JOURNAL J1

Date Account Titles and Explanation Debit Credit

10 Repairs Expense 390

Accounts Payable 390

Recorded repair costs to be paid in Nov.

12 Accounts Receivable 3,200

Service Revenue 3,200

Provided service on account.

16 Supplies 410

Accounts Payable 410

Purchased supplies on account.

24 Utilities Expense 148

Cash 148

Paid October utility bill.

26 Cash 3,200

Accounts Receivable 3,200

Collected payment from client account.

26 Cash 550

Service Revenue 550

Cash collections on service provided.

28 Cash 1,400

Unearned Revenue 1,400

Collected payment in advance for Nov. service.

 GENERAL JOURNAL J1

Date Account Titles and Explanation Debit Credit

29 Telephone Expense 175

Accounts Payable 175

Recorded October telephone bill to be paid in Nov.

30 Accounts Payable 410

Cash 410

Paid for supplies purchased on account.

31 Interest Expense 80

Notes Payable 500

Cash 580

Paid interest and portion of note payable for Oct.

31 R. Thind, Drawings 2,500

Cash 2,500

Withdrew cash for personal use.

31 Salaries Expense 1,000

Cash 1,000

Paid employee's salary for 2 weeks in Oct.

Back: Problem 2 ([Link])

Demonstration Problem

Chapter 2
The Demonstration Problem below includes an Action Plan and electronic Working Papers (in Excel). Download
the Working Papers and complete the problem, using the Action Plan (be sure to save your work). Once you've
completed the problem, you can compare to the Solution, also available below.

Problem 3
Ming Wong started an editing business on June 1. The following is a list of events and transactions that occurred
concerning Ming's new business.

June 1 Ming Wong invested equipment worth $4,500 into the business.

1 Ming opened a business bank account and deposited personal cash in the amount of $5,000.

2 Paid June's rent for the office, $1,200.

7 Paid for supplies, $200.

10 Performed editing services for a client and received cash of $2,500.

15 Paid the secretary's salary of $1,100.

16 Collected a $3,500 cash advance for an editing contract that will begin in July.

18 Provided editing services for $3,700 on account.

19 Purchased supplies for $300 on account.

21 Received and paid the June cellphone bill for $130. [Hint: use Utilities Expense.]

26 Received the payment in full from the client billed in the June 18 transaction.

27 Received the June utility bill for $120. It will be paid in July.

29 Paid the balance due for the purchase of supplies on June 19.

29 Ming withdrew $600 cash for personal expenses.

30 Received the bill for equipment repair costs of $390. This is due on July 5.

30 Paid the secretary's salary of $1,100.

Instructions
Prepare the journal entries to record each of the events listed.
 Action Plan

Separate journal entries are made for each transaction.

In journalizing, make sure debits equal credits.
Provide an appropriate description of each journal entry.

Download Working Papers (Excel Spreadsheet) (ch02_d3_worksheet.xls)

Next: View the Solution ([Link])

Demonstration Problem

Chapter 2

Problem 3: Solution
GENERAL JOURNAL J1

Date Account Titles and Explanation Debit Credit

June 1 Equipment 4,500

Ming Wong, Capital 4,500

Invested equipment into the business.

1 Cash 5,000

Ming Wong, Capital 5,000

Invested cash into the business.

2 Rent Expense 1,200

Cash 1,200

Paid rent.

7 Supplies 200

Cash 200

Paid for supplies.

10 Cash 2,500

Service Revenue 2,500

Received cash for services performed.

15 Salaries Expense 1,100

Cash 1,100
 GENERAL JOURNAL J1

Date Account Titles and Explanation Debit Credit

Paid employee salaries.

16 Cash 3,500

Unearned Revenue 3,500

Collected cash in advance of performing work.

18 Accounts Receivable 3,700

Service Revenue 3,700

Performed services on account.

19 Supplies 300

Accounts Payable 300

Purchased supplies on account.

21 Utilities Expense 130

Cash 130

Paid cellphone bill.

26 Cash 3,700

Accounts Receivable 3,700

Collection on account.

27 Utilities Expense 120

Accounts Payable 120

Received utility bill.

29 Accounts Payable 300

Cash 300

Payment on account.
 GENERAL JOURNAL J1

Date Account Titles and Explanation Debit Credit

29 Ming Wong, Drawings 600

Cash 600

Owner withdrew cash for personal use.

30 Repairs Expense 390

Accounts Payable 390

Received repair bill for equipment.

30 Salaries Expense 1,100

Cash 1,100

Paid employee salaries.

Back: Problem 3 ([Link])

Demonstration Problem

Chapter 2
The Demonstration Problem below includes an Action Plan and electronic Working Papers (in Excel). Download
the Working Papers and complete the problem, using the Action Plan (be sure to save your work). Once you've
completed the problem, you can compare to the Solution, also available below.

Problem 4
Alana Tofan Legal Services was formed on March 1. The following transactions took place during the first month:

Mar 1 Alana Tofan invested $41,400 cash in the business, as its sole owner.

1 Hired a secretary-receptionist at a salary of $2,100 per month.

1 Signed a two-year rental agreement for an office and paid $24,000 cash in advance for the first year.

1 Purchased furniture and equipment costing $33,000. A cash payment of $5,000 was made
immediately; the remainder was charged on account and will be paid in six months.

1 Paid $1,800 cash for a one-year insurance policy on the equipment.

5 Purchased supplies for $1,500 on account.

7 Paid $420 cash for advertising in March.

18 Provided $20,000 of legal services. Of this amount $8,000 was collected in cash and the balance was
on account.

22 Paid $400 relating to the supplies purchased on March 5.

25 Collected $3,200 of the amount owing from the March 18 transaction.

26 Received the utility bill for March in the amount of $350, to be paid next month.

28 A customer paid $1,200 for legal services to be provided in April.

31 The owner, Alana Tofan, withdrew $3,000 for personal use.

31 Paid the employee her monthly salary of $2,100.

Instructions
A. Prepare the journal entries to record each of the events listed.
B. Post the journal entries to T accounts.

Action Plan
Separate journal entries are made for each transaction.
In journalizing, make sure debits equal credits.
Provide an appropriate description of each journal entry.
Post into T accounts in chronological order.

Download Working Papers (Excel Spreadsheet) (ch02_d4_worksheet.xls)

Next: View the Solution ([Link])

Demonstration Problem

Chapter 2

Problem 4: Solution
A.

GENERAL JOURNAL J1

Date Account Titles and Explanation Debit Credit

Mar Cash 41,400

1

A. Tofan, Capital 41,400

Owner invested cash in business.

1 No entry – not a transaction.

1 Prepaid Rent 24,000

Cash 24,000

Paid first year of rent in advance.

1 Equipment 33,000

Cash 5,000

Accounts Payable 28,000

Purchased equipment on account with down payment.

1 Prepaid Insurance 1,800

Cash 1,800

Paid for a one-year insurance policy.

5 Supplies 1,500
 GENERAL JOURNAL J1

Date Account Titles and Explanation Debit Credit

Accounts Payable 1,500

Purchased office on account.

7 Advertising Expense 420

Cash 420

Paid for March advertising.

18 Cash 8,000

Accounts Receivable 12,000

Service Revenue 20,000

Provided legal services for cash and on account.

22 Accounts Payable 400

Cash 400

Paid part of amount owing for office supplies.

25 Cash 3,200

Accounts Receivable 3,200

Cash collections on account.

26 Utilities Expense 350

Accounts Payable 350

Recorded March utility costs to be paid in April.

28 Cash 1,200

Unearned Revenue 1,200

Collected payment in advance from a customer for legal services to be provided in

April.
 GENERAL JOURNAL J1

Date Account Titles and Explanation Debit Credit

31 A. Tofan, Drawings 3,000

Cash 3,000

Owner took a personal withdrawal of cash.

31 Salaries Expense 2,100

Cash 2,100

Paid employee salaries.

B.

Cash

Mar. 1 41,400 Mar. 1 24,000

18 8,000 1 5,000

25 3,200 1 1,800

28 1,200 7 420

22 400

31 3,000

31 2,100

Balance 17,080

Accounts Receivable

Mar. 18 12,000 Mar. 25 3,200

Balance 8,800

Supplies

Mar. 5 1,500

Prepaid Rent

Mar. 1 24,000

Prepaid Insurance

Mar. 1 1,800
 Equipment

Mar. 1 33,000

Accounts Payable

Mar. 22 400 Mar. 1 28,000

5 1,500

26 350

Balance 29,450

Unearned Revenue

Mar. 28 1,200

A. Tofan, Capital

Mar. 1 41,400

A. Tofan, Drawings

Mar. 31 3,000

Service Revenue

Mar. 18 20,000

Advertising Expense

Mar. 7 420

Salaries Expense

Mar. 31 2,100

Utilities Expense

Mar. 26 350

Back: Problem 4 ([Link])

Demonstration Problem

Chapter 2
The Demonstration Problem below includes an Action Plan and electronic Working Papers (in Excel). Download
the Working Papers and complete the problem, using the Action Plan (be sure to save your work). Once you've
completed the problem, you can compare to the Solution, also available below.

Problem 5
Nesrallah's Management Consulting has the following transactions in August.

Aug 1 Adam Nesrallah, the owner, invested $19,000 cash in the business.

2 Signed a contract with a customer to provide 90 days of consulting services for $25,000.

4 Paid rent in advance for three months, $3,600.

5 Purchased $440 of supplies on account.

6 Received $950 from clients for services provided.

8 Paid $1,200 for a one-year insurance policy.

12 Paid the suppliers for supplies purchased on account on Aug. 5.

17 Performed $1,500 of services on account .

27 Paid secretary $750 salary.

28 Purchased used equipment for $4,000 in exchange for a note payable.

29 Paid the company's owner, Adam Nesrallah, $2,000 cash for personal use.

Instructions
A. Prepare the journal entries to record each of the events listed.
B. Post the journal entries to T accounts.

Action Plan

Separate journal entries are made for each transaction.

In journalizing, make sure debits equal credits.
Provide an appropriate description of each journal entry.
• Post into T accounts in chronological order.
Download Working Papers (Excel Spreadsheet) (ch02_d5_worksheet.xls)

Next: View the Solution ([Link])

Demonstration Problem

Chapter 2

Problem 5: Solution
A.

GENERAL JOURNAL J1

Date Account Titles and Explanation Debit Credit

Aug 1 Cash 19,000

A. Nesrallah, Capital 19,000

Owner invested cash in business.

2 No entry – not a transaction.

4 Prepaid Rent 3,600

Cash 3,600

Paid first three months of rent in advance.

5 Supplies 440

Accounts Payable 440

Purchased supplies on account.

6 Cash 950

Service Revenue 950

Provided consulting services for cash.

8 Prepaid Insurance 1,200

Cash 1,200

Paid for a one-year insurance policy.

 GENERAL JOURNAL J1

Date Account Titles and Explanation Debit Credit

12 Accounts Payable 440

Cash 440

Paid amount owing for supplies purchased on Aug. 5.

17 Accounts Receivable 1,500

Service Revenue 1,500

Billed clients for services performed.

27 Salaries Expense 750

Cash 750

Paid employee salary.

28 Equipment 4,000

Notes Payable 4,000

Purchased used equipment in exchange for a note.

29 A. Nesrallah, Drawings 2,000

Cash 2,000

Owner took a personal withdrawal of cash.

B.

Cash

Aug. 1 19,000 Aug. 4 3,600

6 950 8 1,200

12 440

27 750

29 2,000

Balance 11,960
 Accounts Receivable

Aug. 17 1,500

Supplies

Aug. 5 440

Prepaid Rent

Aug. 4 3,600

Prepaid Insurance

Aug. 8 1,200

Equipment

Aug. 28 4,000

Accounts Payable

Aug. 12 440 Aug. 5 440

Balance 0

Notes Payable

Aug. 28 4,000

A. Nesrallah, Capital

Aug. 1 19,000

A. Nesrallah, Drawings

Aug. 29 2,000

Service Revenue

Aug. 6 950

Aug. 17 1.500

Balance 2.450

Salaries Expense

Aug. 27 750
Back: Problem 5 ([Link])
Demonstration Problem

Chapter 2
The Demonstration Problem below includes an Action Plan and electronic Working Papers (in Excel). Download
the Working Papers and complete the problem, using the Action Plan (be sure to save your work). Once you've
completed the problem, you can compare to the Solution, also available below.

Problem 6
Shawn Klaiber started his own jewellery repair business, Klaiber’s Repair Services, on August 1, 2024. The
following transactions took place during the first month:

Aug 1 Deposited $38,000 cash in a new bank account for the business.

2 Signed a lease for store space. Paid $6,800 cash in advance for the first four months. [Hint: The
portion of the cost that relates to August 2024 ($1,700) is an expense for this month.]

3 Purchased equipment costing $10,000. A cash payment of $3,000 was made immediately. The
remainder will be paid in September.

4 Paid $145 for a one-month ad in the local paper.

5 Hired his first employee to work in the workshop. The employee will be paid a salary of $1,920 per
month.

6 Paid $1,500 for a one-year insurance policy for his business. [Hint: The portion of the cost that relates
to August 2024 ($125) is an expense for this month.]

8 Supplies of $3,750 were purchased on account.

15 Withdrew $4,000 cash for personal use.

20 Total services provided to date were $6,400 ($500 in cash and $5,900 on account).

20 Supplies used during August totalled $2,100. (Hint: Debit this to Supplies Expense).

26 Collected $4,400 from customers on account.

30 Paid utility bills totalling $350 for the month of August.

31 Paid the employee's monthly salary of $1,920.

Instructions
A. Prepare the journal entries to record each of the events listed.
B. Post the journal entries to T accounts.
C. Prepare a trial balance as at August 31, 2024.
D. Prepare an income statement and a statement of owner's equity for Klaiber’s Repair Services for the month
ended August 31, 2024, and a balance sheet as at August 31, 2024.

Action Plan

Separate journal entries are made for each transaction.

In journalizing, make sure debits equal credits.
Provide an appropriate description of each journal entry.
Arrange the ledger in statement order, beginning with the balance sheet accounts.
Post into T accounts in chronological order.
The trial balance lists accounts in the order in which they appear in the ledger.
Debit balances are listed in the left column of the trial balance and credit balances in the right column.
Prepare the income statement first, then the statement of owner's equity, and then the balance sheet.

Download Working Papers (Excel Spreadsheet) (ch02_d6_worksheet.xls)

Next: View the Solution ([Link])

Demonstration Problem

Chapter 2

Problem 6: Solution
A.

GENERAL JOURNAL J1

Date Account Titles and Explanation Debit Credit

Aug 1 Cash 38,000

S. Klaiber, Capital 38,000

Invested cash in business.

2 Prepaid Rent 5,100

Rent Expense ($6,800 ÷ 4 months) 1,700

Cash 6,800

Prepaid rent for four months.

3 Equipment 10,000

Cash 3,000

Accounts Payable 7,000

Purchased equipment with down payment.

4 Advertising Expense 145

Cash 145

Paid for a one-month ad.

5 No entry – not a transaction.

6 Prepaid Insurance 1,375

 GENERAL JOURNAL J1

Date Account Titles and Explanation Debit Credit

Insurance Expense ($1,500 ÷ 12 months) 125

Cash 1,500

Paid for a one-year insurance policy.

8 Supplies 3,750

Accounts Payable 3,750

Purchased supplies on account.

15 S. Klaiber, Drawings 4,000

Cash 4,000

Withdrew cash for personal use.

20 Cash 500

Accounts Receivable 5,900

Service Revenue 6,400

Billed customers for services provided and received partial payment.

20 Supplies Expense 2,100

Supplies 2,100

Expense for supplies used.

26 Cash 4,400

Accounts Receivable 4,400

Cash collections on account.

30 Utilities Expense 350

Cash 350

Paid utilities.
 GENERAL JOURNAL J1

Date Account Titles and Explanation Debit Credit

31 Salaries Expense 1,920

Cash 1,920

Paid employee's salary.

B.

Cash

Aug. 1 38,000 Aug. 2 6,800

20 500 3 3,000

26 4,400 4 145

6 1,500

15 4,000

30 350

31 1,920

Balance 25,185

Accounts Receivable

Aug. 20 5,900 Aug. 26 4,400

Balance 1,500

Supplies

Aug. 8 3,750 Aug. 20 2,100

Balance 1,650

Prepaid Rent

Aug. 2 5,100

Prepaid Insurance

Aug. 6 1,375

Equipment

Aug. 3 10,000
 Accounts Payable

Aug. 3 7,000

Aug. 8 3,750

Balance 10,750

S. Klaiber, Capital

Aug. 1 38,000

S. Klaiber, Drawings

Aug. 15 4,000

Service Revenue

Aug. 20 6,400

Advertising Expense

Aug. 4 145

Insurance Expense

Aug. 6 125

Rent Expense

Aug. 2 1,700

Supplies Expense

Aug. 20 2,100

Salaries Expense

Aug. 31 1,920

Utilities Expense

Aug. 30 350

C.
 KLAIBER'S REPAIR SERVICES
Trial Balance
August 31, 2024

Debit Credit

Cash $ 25,185

Accounts receivable 1,500

Supplies 1,650

Prepaid rent 5,100

Prepaid insurance 1,375

Equipment 10,000

Accounts payable $ 10,750

S. Klaiber, capital 38,000

S. Klaiber, drawings 4,000

Service revenue 6,400

Advertising expense 145

Insurance expense 125

Rent expense 1,700

Supplies expense 2,100

Salaries expense 1,920

Utilities expense 350

$ 55,150 $ 55,150

D.

KLAIBER'S REPAIR SERVICES

Income Statement
Month Ended August 31, 2024

Revenues

Service revenue $6,400

Expenses

Advertising expense $ 145

Insurance expense 125

Rent expense 1,700

Supplies expense 2,100

 KLAIBER'S REPAIR SERVICES
Income Statement
Month Ended August 31, 2024

Salaries expense 1,920

Utilities expense 350

Total expense 6,340

Profit for the month $ 60

KLAIBER'S REPAIR SERVICES

Statement of Owner's Equity
Month Ended August 31, 2024

S. Klaiber, capital, August 1, 2024 $0

Add: Investments $38,000

Profit for the month 60 38,060

Less: Drawings 4,000

S. Klaiber, capital, August 31, 2024 $34,060

KLAIBER'S REPAIR SERVICES

Balance Sheet
August 31, 2024

Assets

Cash $25,185

Accounts receivable 1,500

Supplies 1,650

Prepaid rent 5,100

Prepaid insurance 1,375

Equipment 10,000

Total assets $44,810

Liabilities and Owner's Equity

Liabilities

Accounts payable $10,750

Owner's Equity

S. Klaiber, capital 34,060

 KLAIBER'S REPAIR SERVICES
Balance Sheet
August 31, 2024

Total liabilities and owner's equity $44,810

Back: Problem 6 ([Link])

Demonstration Problem

Chapter 2
The Demonstration Problem below includes an Action Plan and electronic Working Papers (in Excel). Download
the Working Papers and complete the problem, using the Action Plan (be sure to save your work). Once you've
completed the problem, you can compare to the Solution, also available below.

Problem 7
The trial balance of Garana's Bakery on June 30, 2024 is shown below:

GARANA'S BAKERY
Trial Balance
June 30, 2024

Account No. Debit Credit

101 Cash $12,620

112 Accounts receivable 2,620

126 Supplies 1,900

157 Equipment 9,600

201 Accounts payable $5,100

206 Unearned revenue 1,300

301 R. Garana, capital 20,340

$26,740 $26,740

The July transactions were as follows:

July 5 Received $1,420 cash from customers on account.

10 Billed customers for bakery services performed, $6,700.

15 Paid employee salaries, $1,800.

15 Withdrew $500 for personal use.

16 Performed $850 of services for customer who paid in advance in June.

20 Paid $2,400 to creditors on account.

21 Received $250 cash for services provided.

22 Purchased a new bakery oven and other kitchen equipment for $4,500 on account.
 23 Hired a new baker who will start working on July 28 and agreed to pay her $500 per week.

26 Purchased supplies on account, $400.

29 Invested $1,200 of personal funds into the business.

30 Received the $750 July utility bill. It is due on August 28.

Provision should be made for the following additional accounts in the ledger: No. 306 R. Garana, Drawings, No.
426 Service Revenue, No. 726 Salaries Expense, and No. 732 Utilities Expense.

Instructions
A. Journalize the transactions.
B. Post the transactions to the ledger accounts.
C. Prepare a trial balance as at July 31, 2024.

Action Plan

Prepare separate journal entries for each transaction.

In journalizing, use specific account titles taken from the chart of accounts.
Provide an appropriate description of each journal entry.
Arrange the ledger in statement order, beginning with the balance sheet accounts.
Enter the balances at June 30, 2024
Post the journal entries in chronological order.
Numbers in the reference column indicate the amount has been posted.
The trial balance lists accounts in the order in which they appear in the ledger.
List debit balances in the left column, and credit balances in the right column.

Download Working Papers (Excel Spreadsheet) (ch02_d7_worksheet.xls)

Next: View the Solution ([Link])

Demonstration Problem

Chapter 2

Problem 7: Solution
A.

GENERAL JOURNAL J1

Date Account Titles and Explanation Ref. Debit Credit

July 5 Cash 101 1,420

Accounts Receivable 112 1,420

Cash collections on account.

10 Accounts Receivable 112 6,700

Service Revenue 426 6,700

Performed services on account.

15 Salaries Expense 726 1,800

Cash 101 1,800

Paid employee's salary.

15 R. Garana, Drawings 306 500

Cash 101 500

Withdrew cash for personal use.

16 Unearned Revenue 206 850

Service Revenue 426 850

Performed service for customer who paid in advance.

20 Accounts Payable 201 2,400

 GENERAL JOURNAL J1

Date Account Titles and Explanation Ref. Debit Credit

Cash 101 2,400

Paid creditors on account.

21 Cash 101 250

Service Revenue 426 250

Performed services for cash.

22 Equipment 157 4,500

Accounts Payable 201 4,500

Purchased kitchen equipment on account.

26 Supplies 126 400

Accounts Payable 201 400

Purchased supplies on account.

29 Cash 101 1,200

R. Garana, Capital 301 1,200

Invested cash in business.

30 Utilities Expense 732 750

Accounts Payable 201 750

Utilities recorded on account.

B.

No. 101 — Cash

Date Explanation Ref. Debit Credit Balance

July 1 Balance  12,620

5 J1 1,420 14,040

15 J1 1,800 12,240
No. 101 — Cash

Date Explanation Ref. Debit Credit Balance

15 J1 500 11,740

20 J1 2,400 9,340

21 J1 250 9,590

29 J1 1,200 10,790

No. 112 — Accounts Receivable

Date Explanation Ref. Debit Credit Balance

July 1 Balance  2,620

5 J1 1,420 1,200

15 J1 6,700 7,900

No. 126 — Supplies

Date Explanation Ref. Debit Credit Balance

July 1 Balance  1,900

26 J1 400 2,300

No. 157 — Equipment

Date Explanation Ref. Debit Credit Balance

July 1 Balance  9,600

22 J1 4,500 14,100

No. 201 — Accounts Payable

Date Explanation Ref. Debit Credit Balance

July 1 Balance  5,100

20 J1 2,400 2,700

22 J1 4,500 7,200

26 J1 400 7,600

30 J1 750 8,350
No. 206 — Unearned Revenue

Date Explanation Ref. Debit Credit Balance

July 1 Balance  1,300

16 J1 850 450

No. 301 —R. Garana, Capital

Date Explanation Ref. Debit Credit Balance

July 1 Balance  20,340

29 J1 1,200 21,540

No. 306 —R. Garana, Drawings

Date Explanation Ref. Debit Credit Balance

July 15 J1 500 500

No. 426 — Service Revenue

Date Explanation Ref. Debit Credit Balance

July 10 J1 6,700

16 J1 850 7,550

21 J1 250 7,800

No. 726 —Salaries Expense

Date Explanation Ref. Debit Credit Balance

July 15 J1 1,800 1,800

No. 732 —Utilities Expense

Date Explanation Ref. Debit Credit Balance

July 30 J1 750 750

C.

GARANA’S BAKERY
Trial Balance
July 31, 2024

Account No. Debit Credit

101 Cash $10,790

 GARANA’S BAKERY
Trial Balance
July 31, 2024

Account No. Debit Credit

112 Accounts receivable 7,900

126 Supplies 2,300

157 Equipment 14,100

201 Accounts payable $ 8,350

206 Unearned revenue 450

301 R. Garana, capital 21,540

306 R. Garana, drawings 500

426 Service Revenue 7,800

726 Salaries expense 1,800

732 Utilities expense 750

$38,140 $38,140

Back: Problem 7 ([Link])

Demonstration Problem

Chapter 2
The Demonstration Problem below includes an Action Plan and electronic Working Papers (in Excel). Download
the Working Papers and complete the problem, using the Action Plan (be sure to save your work). Once you've
completed the problem, you can compare to the Solution, also available below.

Problem 8
The trial balance of Nazari Electrical Services on April 30, 2024 is shown below:

NAZARI ELECTRICAL SERVICES

Trial Balance
April 30, 2024

Debit Credit

Cash $ 14,600

Accounts receivable 1,500

Supplies 600

Equipment 10,500

Accounts payable $ 1,700

Unearned revenue 1,800

H. Nazari, capital 15,110

H. Nazari, drawings 1,000

Service revenue 11,200

Utilities expense 400

Salaries expense 950

Supplies expense 1,000

$29,810 $29,810

The May transactions were as follows:

May 4 Performed $650 of electrical services for customer who paid in advance in April.

5 Performed electrical services for a client and received cash of $1,280.

7 Purchased supplies on account for $300.

 9 Collected accounts receivable of $500.

15 Paid the receptionist a salary of $450.

16 Paid accounts payable of $1,700.

17 Received a contract for $2,000 to perform electrical work in June.

18 Performed electrical services for $1,000 on account.

20 Received a utility bill for $370 to be paid in June.

25 H. Nazari invested $1,000 into the business.

30 Paid the receptionist a salary of $450.

31 H. Nazari withdrew $300 cash for personal expenses.

Instructions
A. Journalize the transactions.
B. Post the transactions to the T accounts.
C. Prepare a trial balance as at May 31, 2024.

Action Plan

Prepare separate journal entries for each transaction.

In journalizing, use specific account titles taken from the chart of accounts.
Provide an appropriate description of each journal entry.
Arrange ledger in statement order, beginning with the balance sheet accounts.
Enter the balances at April 30, 2024.
Post the journal entries in chronological order.
Numbers in the reference column indicate the amount has been posted.
The trial balance lists accounts in the order in which they appear in the ledger.
List debit balances in the left column, and credit balances in the right column.

Download Working Papers (Excel Spreadsheet) (ch02_d8_worksheet.xls)

Next: View the Solution ([Link])

Demonstration Problem

Chapter 2

Problem 8: Solution
A.

GENERAL JOURNAL J1

Date Account Titles and Explanation Debit Credit

Aug 1 Unearned Revenue 650

Service Revenue 650

Performed services for customer who had paid in advance.

5 Cash 1,280

Service Revenue 1,280

Performed services for customer for cash.

7 Supplies 300

Accounts Payable 300

Purchased supplies on account.

9 Cash 500

Accounts Receivable 500

Collection on account.

15 Salaries Expense 450

Cash 450

Paid salaries to employees.

16 Accounts Payable 1,700

 GENERAL JOURNAL J1

Date Account Titles and Explanation Debit Credit

Cash 1,700

Payment on account.

17 No journal entry; not a transaction.

18 Accounts Receivable 1,000

Service Revenue 1,000

Performed services on account.

20 Utilities Expense 370

Accounts Payable 370

Received utility bill.

25 Cash 1,000

H. Nazari, Capital 1000

Invested cash into the business.

30 Salaries Expense 450

Cash 450

Paid salaries to employees.

31 H. Nazari, Drawings 300

Cash 300

Owner withdrew cash for personal use.

B.

Cash

Apr. 30 14,600 May 15 450

May 5 1,280 16 1,700

 Cash

9 500 30 450

25 1,000 31 300

May 31 Bal. 14,480

Accounts Receivable

Apr. 30 1,500 May 9 500

May 18 1,000

May 31 Bal. 2,000

Supplies

Apr. 30 600

May 7 300

May 31 Bal. 900

Equipment

Apr. 30 10,500

May 31 Bal. 10,500

Accounts Payable

May 16 1,700 Apr. 30 1,700

May 7 300

May 20 370

May 31 Bal. 670

Unearned Revenue

May 4 650 Apr. 30 1,800

May 31 Bal. 1,150

H. Nazari, Capital

Apr.30 15,110

May 25 1,000

May 31 Bal. 16,110

 H. Nazari, Drawings

Apr.30 1,000

May 31 300

May 31 Bal. 1,300

Service Revenue

Apr.30 11,200

May 4 650

5 1,280

18 1,000

May 31 Bal. 14,130

Utilities Expense

Apr. 30 400

May 20 370

May 31 Bal. 770

Salaries Expense

Apr. 30 950

May 15 450

May 30 450

May 31 Bal. 850

Supplies Expense

Apr. 30 260

May 31 Bal. 260

C.

NAZARI ELECTRICAL SERVICES

Trial Balance
May 31, 2024

Debit Credit

Cash $14,480

Accounts receivable 2,000

 NAZARI ELECTRICAL SERVICES
Trial Balance
May 31, 2024

Debit Credit

Supplies 900

Equipment 10,500

Accounts payable $670

Unearned revenue 1,150

H. Nazari, capital 16,110

H. Nazari, drawings 1,300

Service revenue 14,130

Utilities expense 770

Salaries expense 1,850

Supplies expense 260

$32,060 $32,060

Back: Problem 8 ([Link])