Homework Chapter 2

P2.2
(a) Journal entry
April 1 Invested €20,000 cash in her business in exchange for ordinary shares.
Dr Cash 20,000
Cr Share capital 20,000
April 1 Hired a secretary-receptionist at a salary of €700 per week payable monthly. -> Not a
transaction
April 2 Paid office rent for the month €1,100.
Dr Rent expense 1,100
Cr Cash 1,100
April 3 Purchased dental supplies on account from Dazzle Company €4,000.
Dr Supplies 4,000
Cr Accounts payable (Dazzle) 4,000
April 10 Performed dental services and billed insurance companies €5,100.
Dr Accounts receivable 5,100
Cr Service Revenue 5,100
April 11 Received €1,000 cash advance from Leah Mataruka for an implant.
Dr Cash 1,000
Cr Unearned Ser. Revenue (liability) 1,000
April 20 Received €2,100 cash for services performed from Michael Santos.
Dr Cash 2,100
Cr Service Revenue 2,100
April 30 Paid secretary-receptionist for the month €2,800.
Dr SW expense 2,800
Cr Cash 2,800
April 30 Paid €2,400 to Dazzle for accounts payable due.
Dr Accounts payable (Dazzle) 2,400
Cr Cash 2,400

(b) Post to the ledger accounts

Dr Cash Cr Dr Share Cr
capital
OB: 0 OB: 0
20,000 (1) 1,100 (2) 20,000 (1)
1,000 (11) 2,800 (30)
2,100 (20) 2,400 (30)
CB: 16,800 CB: 20,000

Supplies AP
OB: 0 OB: 0
4,000 (3) 2,400 (30) 4,000 (3)
CB: 4,000 CB: 1,600

Rent Ser.
expense Revenue
 1,100 (2) 5,100 (10)
2,100 (20)

Total: Total:
1,100 7,200

Account Unearned
receivable Ser.
Revenue
OB: 0 OB: 0
5,100 (10) 1,000 (11)
CB: 5,100 CB: 1,000

SW
expense
2,800 (30)

Total:
2,800

*** Note: chapter 4 Revenue, expense, dividend accounts do not have opening/closing Balance
(zero balance) because balance of these accounts at the end of accounting period are transferred
to Retained earnings account.

(Opening RE + Revenue – Expense) – Dividend = Closing RE

(c) Prepare a trial balance on April 30, 2020.

Trial balance
Emily stansbury dentist
April 30, 2020
Monetary unit: Euro
Accounts Debit Credit
Cash 16,800
Account receivable 5,100

Supplies 4,000
Rent expense 1,100
SW expense 2,800
Account payable 1,600
Unearned Ser. Revenue 1,000

Share capital 20,000

Ser. Revenue 7,200
Total 29,800 29,800
P2.3
a. Prepare journal entries to record each of the events listed.

Transactions on May 1:

1. Rahul Shah invested 40,000 cash in the company in exchange for ordinary shares.
Dr Cash 40,000
Cr Share capital 40,000

2. Hired two employees to work in the warehouse. They will each be paid a salary of 3,050 per
month. -> not a transaction -> no entry

3. Signed a 2-year rental agreement on a warehouse; paid 24,000 cash in advance for the first
year.

Dr Prepaid rent (assets) 24,000

Cr Cash 24,000

Rent expense of a month = 24,000/12 = 2,000

Prepaid expense is asset account. Common: prepaid rent, prepaid insurance…

4. Purchased furniture and equipment costing 30,000. A cash payment of 10,000 was made
immediately; the remainder will be paid in 6 months.

Dr Equipment 30,000

Cr Cash 10,000

Cr Account payable 20,000

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

Dr Prepaid insurance (assets) 1,800

Cr Cash 1,800

Insurance expense of a month = 1,800/12 = 150

Transactions during the remainder of the month:

6. Purchased basic office supplies for 420 cash.

Dr Supplies 420

Cr Cash 420
7. Purchased more office supplies for 1,500 on account.

Dr Supplies 1,500

Cr Account payable 1,500

8. Total revenues earned were 20,000; of which 8,000 cash and 12,000 on account.

Dr Cash 8,000

Dr Account receivable 12,000

Cr Service revenue 20,000

9. Paid 400 to suppliers for accounts payable due.

Dr Account payable 400

Cr Cash 400

10. Received 3,000 from customers in payment of accounts receivable.

Dr Cash 3,000

Cr Account receivable 3,000

11. Received utility bills in the amount of 380, to be paid next month.

Dr Utilities expense 380

Cr Account payable 380

12. Paid the monthly salaries of the two employees, totaling 6,100.

Dr Salaries and wages expense 6,100

Cr Cash 6,100

b. Post the journal entries to T-accounts.

Cash Share
capital
OB: 0 OB: 0
40,000 (1) 24,000 (3) 40,000 (1)
8,000 (8) 10,000 (4)
3,000 (10) 1,800 (5)
420 (6)
400 (9)
6,100 (12)
CB: 8,280 CB: 40,000

Supplies AP
OB: 0 OB: 0
420 (6) 400 (9) 20,000 (4)
1,500 (7) 1,500 (7)
380 (11)
CB: 1,920 CB: 21,480

Equipment Service
revenue

OB: 0 20,000 (8)

30,000 (4)

CB: 30,000 Total:

20,000

Prepaid SW
rent expense

OB: 0 6,100 (12)

24,000 (3)

CB: 24,000 Total:

6,100

Prepaid Utilities
insurance expense

OB: 0 380 (11)

1,800 (5)

CB: 1,800 Total: 380

Accounts
receivable
 OB: 0

12,000 (8) 3,000 (10)

CB: 9,000

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c. Prepare a trial balance as of May 31, 2020.

Trial balance
Kochi service
May 31, 2020
Monetary unit:
Accounts Debit Credit
Cash 8,280
Account receivable 9,000

Supplies 1,920
Prepaid Rent 24,000
Prepaid insurance 1,800
Equipment 30,000
SW expense 6,100
Utilities expense 380
Account payable 21,480
Common stock 40,000
Ser. Revenue 20,000
Total 81,480 81,480

P2.4
Correct error entry
1. Cash received from a customer in payment of its account was debited for $580, and
Accounts Receivable was credited for the same amount. The actual collection was for
$850.

Incorrect entry:
Dr Cash 580
Cr Account Receivable 580

Correct entry should be:

Dr Cash 850
Cr Account Receivable 850

Correcting entry: (Correcting entry + Incorrect entry = Correct entry)

Dr Cash 270
 Cr Account Receivable 270

2. The purchase of a computer on account for $710 was recorded as a debit to Supplies for
$710 and a credit to Accounts Payable for $710.

Incorrect entry:
Dr Supplies 710
Cr Account payable 710

Correct entry should be:

Dr Equipment 710
Cr Account payable 710

Correcting entry: (Correcting entry + Incorrect entry = Correct entry)

Dr Equipment 710
Cr Supplies 710

3. Services were performed on account for a client for $980. Accounts Receivable was
debited for $980, and Service Revenue was credited for $98.

Incorrect entry:
Dr Account receivable 980
Cr Service revenue 98

Correct entry should be:

Dr Account receivable 980
Cr Service revenue 980

Correcting entry: (Correcting entry + Incorrect entry = Correct entry)

Cr Service Revenue 882

4. A debit posting to Salaries and Wages Expense of $700 was omitted.

Correcting: Post to ledger Salaries and wages expense for 700

5. A payment of a balance due for $306 was credited to Cash for $306 and credited to
Accounts Payable for $360.

Incorrect entry:
Cr Cash 306
Cr Account payable 360

Correct entry should be:

Dr Account payable 306
Cr Cash 306
 Correcting entry: (Correcting entry + Incorrect entry = Correct entry)
Erase incorrect entry: Dr Account payable 360
Additional: Dr Account payable 306

 Dr Account payable 306+360 = 666

6. A dividend of $600 cash was debited to Salaries and Wages Expense for $600 and
credited to Cash for $600.

Incorrect entry:
Dr SW expense 600
Cr Cash 600

Correct entry should be:

Dr Dividends 600
Cr Cash 600

Correcting entry: (Correcting entry + Incorrect entry = Correct entry)

Dr Dividends 600
Cr SW expense 600

Accounts Incorrect trial balance Correct trial balance

Dr Cr Dr Cr
Cash (Dr 3,340 + 270) 3,340 3,610
Account receivable (2,812 – 270) 2,812 2,542
Supplies (1,200 – 710) 1,200 490
Equipment (2,600 +710) 2,600 3,310
Account payable (3,666 – 666) 3,666 3,000
Unearned Ser. Revenue (Cr 1,100) 1,100 1,100
Share capital 8,000 8,000
Dividends (800 +600) 800 1,400
Ser. Revenue (2,480 + 882) 2,480 3,362
Salaries and wages expense (3,200 3,200 3,300
+700 -600)
Utilities expense 810 810
Total 12,522 17,486 15,462 15,462

T-account

Cash
OB: 3,340
270 (1)
CB: 3,610
 Account receivable
OB: 2,812
270 (1)
CB: 2,542

Supplies
OB: 1,200 710 (2)
CB: 490