Accounting (Question : 2022)

Question-3 (2022)

Here is a step-by-step solution to the problem, presented in charts for clarity.

(a) Journal Entries

Date Account Titles and Explanation Debit ($) Credit ($)
April 1 Cash 20,000
Owner’s Capital 20,000
April 1 Salaries Expense 2,800
Salaries Payable 2,800
April 2 Office Rent Expense 1,100
Cash 1,100
April 3 Dental Supplies 4,000
Accounts Payable 4,000
April 10 Accounts Receivable 5,100
Service Revenue 5,100
April 11 Cash 1,000
Unearned Revenue 1,000
April 20 Cash 2,100
Service Revenue 2,100
April 30 Salaries Expense 2,800
Cash 2,800
April 30 Accounts Payable 2,400
Cash 2,400

(b) Ledger Postings

Cash
Date Description Debit ($) Credit ($) Balance ($)
April 1 Investment 20,000 20,000
April 2 Rent Payment 1,100 18,900
April 11 Advance Received 1,000 19,900
April 20 Service Revenue 2,100 22,000
April 30 Salary Payment 2,800 19,200
April 30 Payment to Dazzle 2,400 16,800
 Owner’s Capital

Date Description Debit ($) Credit ($) Balance ($)

April 1 Initial Investment 20,000 20,000

Salaries Expense

Date Description Debit ($) Credit ($) Balance ($)

April 1 Monthly Expense 2,800 2,800
April 30 Monthly Expense 2,800 5,600

Salaries Payable

Date Description Debit ($) Credit ($) Balance ($)

April 1 Accrued Salaries 2,800 2,800

Dental Supplies

Date Description Debit ($) Credit ($) Balance ($)

April 3 Purchase on Account 4,000 4,000

Accounts Payable

Date Description Debit ($) Credit ($) Balance ($)

April 3 Dental Supplies 4,000 4,000
April 30 Payment to Dazzle 2,400 1,600

Accounts Receivable

Date Description Debit ($) Credit ($) Balance ($)

April 10 Services Rendered 5,100 5,100

Service Revenue

Date Description Debit ($) Credit ($) Balance ($)

April 10 Billed to Insurers 5,100 5,100
April 20 Cash Received 2,100 7,200

Unearned Revenue

Date Description Debit ($) Credit ($) Balance ($)

April 11 Advance Received 1,000 1,000
Office Rent Expense

Date Description Debit ($) Credit ($) Balance ($)

April 2 Monthly Rent 1,100 1,100

(c) Trial Balance as of April 30, 2021

Account Debit ($) Credit ($)
Cash 16,800
Accounts Receivable 5,100
Dental Supplies 4,000
Office Rent Expense 1,100
Salaries Expense 5,600
Unearned Revenue 1,000
Accounts Payable 1,600
Salaries Payable 2,800
Service Revenue 7,200
Owner’s Capital 20,000
Totals 32,600 32,600
Question 3(2022)

Here’s a step-by-step tabular analysis of the transactions for Julie Spengel's Travel Agency. A
tabular analysis reflects the changes in the accounting equation:

Accounting Equation: Assets = Liabilities + Owner's Equity

Tabular Analysis

Transaction Assets = Liabilities + Owner's Explanation

No. Equity
1 Cash +15,000 Owner's Julie invests cash to
Capital start the business.
+15,000
2 Cash -600 Rent Expense Paid rent for April.
-600
3 Cash -3,000; Purchased
Equipment equipment for cash.
+3,000
4 Accounts Advertising Advertising costs
Payable +700 Expense -700 incurred on account.
5 Cash -906 Supplies Purchased office
Expense -906 supplies for cash.
6 Cash +3,000; Service Performed services:
Accounts Revenue $3,000 in cash,
Receivable +10,000 $7,000 on account.
+7,000
7 Cash -500 Owner’s Owner withdrew
Drawing -500 cash for personal
use.
8 Cash -500 Accounts Paid part of
Payable - advertising costs to
500 Chicago Tribune.
9 Cash -2,500 Salaries Paid employees'
Expense - salaries for the
2,500 month.
10 Cash +4,000; Received cash from
Accounts customers billed
Receivable - earlier.
4,000
Explanation of Transactions

1. April 1: The owner invested $15,000 cash into the business. This increases cash and
owner’s equity (capital).
2. April 2: Rent payment decreases cash and is recorded as an expense, reducing equity.
3. April 3: Equipment purchased increases equipment as an asset and decreases cash by
$3,000.
4. April 4: Advertising costs incurred on account increase liabilities (accounts payable) and
are recorded as an expense, reducing equity.
5. April 5: Office supplies purchased reduce cash and increase office supplies expense,
which lowers equity.
6. April 6: Service revenue of $10,000 increases assets (cash $3,000 and accounts
receivable $7,000) and owner’s equity (service revenue).
7. April 7: The owner’s withdrawal reduces cash and equity (owner’s drawing).
8. April 8: A payment of $500 reduces both cash and the liability (accounts payable).
9. April 9: Employees’ salaries paid decrease cash and equity (salaries expense).
10. April 10: Collected cash from customers decreases accounts receivable and increases
cash, with no net effect on equity.

Cumulative Table with Account Balances

Account Debit ($) Credit ($)

Cash 14,094
Equipment 3,000
Accounts Receivable 3,000
Accounts Payable 200
Owner's Capital 15,000
Service Revenue 10,000
Rent Expense 600
Advertising Expense 700
Supplies Expense 906
Salaries Expense 2,500
Owner’s Drawing 500
Question—5 (2022)

Below are the adjusting entries for the month of May 2021 for Krause Consulting, based on the
information provided.

Adjusting Entries

Date Account Titles and Debit Credit

Explanation ($) ($)
May 31 Supplies Expense 900
Supplies 900
Explanation: $900 worth of supplies has been
used during the month, reducing the Supplies
account.
May 31 Utilities Expense 250
Utilities Payable 250
Explanation: Utilities incurred but not paid are
recorded as an expense and a liability.
May 31 Unearned Service 1,600
Revenue
Service Revenue 1,600
Explanation: $1,600 of unearned service revenue
has been earned during the month, reducing the
liability and increasing revenue.
May 31 Salaries Expense 552
Salaries Payable 552
Explanation: Salaries for two employees for
three days (Wednesday through Friday) are
accrued. ($920 ÷ 5 × 3 × 2 = $552).
May 31 Depreciation Expense 190
Accumulated 190
Depreciation—
Equipment
Explanation: Monthly depreciation of $190 is
recorded for office furniture.
May 31 Accounts Receivable 1,700
Service Revenue 1,700
Explanation: Invoices for $1,700 of services
performed but not yet recorded are recognized as
revenue and accounts receivable.
Descriptions of Adjustments

1. Supplies Expense Adjustment

Supplies used during the month are removed from the Supplies account and recorded as
an expense.
2. Utilities Expense Adjustment
Utility expenses incurred but unpaid are recorded as a liability (Utilities Payable) and an
expense.
3. Unearned Revenue Adjustment
Of the $2,000 in unearned revenue, $1,600 was earned, leaving $400 in the Unearned
Revenue account as a liability.
4. Salaries Expense Adjustment
Salaries for Wednesday, Thursday, and Friday are accrued. Salaries Payable increases as
a liability.
5. Depreciation Adjustment
Monthly depreciation of office furniture is recorded as an expense and added to
Accumulated Depreciation.
6. Service Revenue Adjustment
Services performed but not yet billed are recorded as Accounts Receivable and Service
Revenue.

Final Chart of Adjusting Entries

Account Debit ($) Credit ($)

Supplies Expense 900
Supplies 900
Utilities Expense 250
Utilities Payable 250
Unearned Service Revenue 1,600
Service Revenue 1,600
Salaries Expense 552
Salaries Payable 552
Depreciation Expense 190
Accumulated Depreciation 190
Accounts Receivable 1,700
Service Revenue 1,700