HANDOUT 3–1 SOLUTION
TRANSACTION ANALYSIS AND POSTING TO T-ACCOUNTS
The following activities occurred during January 2016. Prepare a journal entry for ensure that the basic
accounting equation balances for each transaction. Then, summarize the effects of each transaction in the
appropriate T-account. (See the last page for T-accounts.)
(a) Provide website design services for $40,000.
Debit and credit the accounts affected
Cash (+A)
40,000
Revenue (+R, +SE)
40,000
Ensure the equation still balances and debits = credits
Assets
=
Liabilities
+
Stockholders’ Equity
Cash
+40,000
Revenue
+40,000
(b) Provide website design services to Acme Company, for $20,000 on account.
Debit and credit the accounts affected
Accounts Receivable (+A)
20,000
Revenue (+R, +SE)
20,000
Ensure the equation still balances and debits = credits
Assets
=
Liabilities
+
Stockholders’ Equity
Accounts
Receivable
+20,000
Revenue
+20,000
(c) Collect $18,000 from Acme Company on account.
Debit and credit the accounts affected
Cash (+A)
18,000
Accounts Receivable (–A)
18,000
Ensure the equation still balances and debits = credits
Assets
=
Liabilities
+
Stockholders’ Equity
Cash
+18,000
Accounts
Receivable
–18,000
HANDOUT 3–1 SOLUTION, continued
(d) Sell a $1,000 gift certificate.
Debit and credit the accounts affected
Cash (+A)
1,000
Unearned Revenue (+L)
1,000
Ensure the equation still balances and debits = credits
Assets
=
Liabilities
+
Stockholders’ Equity
Cash
+1,000
Unearned
Revenue.
+1,000
(e) Customer redeems $1,000 gift certificate for website design services.
Debit and credit the accounts affected
Unearned Revenue (−L)
1,000
Revenue (+R, +SE)
1,000
Ensure the equation still balances and debits = credits
Assets
=
Liabilities
+
Stockholders’ Equity
Unearned
Revenue
-1,000
Revenue
+1,000
(f) Paid employees $16,000 earned.
Debit and credit the accounts affected
Wage expense (+E, –SE)
16,000
Cash (–A)
16,000
Ensure the equation still balances and debits = credits
Assets
=
Liabilities
+
Stockholders’ Equity
Cash
–16,000
Wage Exp.
–16,000
HANDOUT 3–1 SOLUTION, continued
(g) Paid $3,000 insurance for next year in advance.
Debit and credit the accounts affected
Prepaid insurance (+A)
3,000
Cash (–A)
3,000
Ensure the equation still balances and debits = credits
Assets
=
Liabilities
+
Stockholders’ Equity
Prepaid
Insurance
+3,000
Cash
–3,000
(h) Paid $9,000 rent for next six months in advance.
Debit and credit the accounts affected
Prepaid rent(+A)
9,000
Cash (–A)
9,000
Ensure the equation still balances and debits = credits
Assets
=
Liabilities
+
Stockholders’ Equity
Prepaid.
Rent
+9,000
Cash
–9,000
(i) Received $250 telephone bill for previous month, to be paid next month.
Debit and credit the accounts affected
Telephone expense (+E, –SE)
250
Accounts payable (+L)
250
Ensure the equation still balances and debits = credits
Assets
=
Liabilities
+
Stockholders’ Equity
Accts. Pay.
+250
Tel. Exp.
–250
(j) Received $500 utility bill for this month, to be paid immediately.
Debit and credit the accounts affected
Utilities expense (+E, –SE)
500
Cash (–A)
500
Ensure the equation still balances and debits = credits
Assets
=
Liabilities
+
Stockholders’ Equity
Cash
–500
Utilities
Expense
–500
HANDOUT 3–1 SOLUTION, continued
Assets
Liabilities
Stockholders’ Equity
+ Cash –
BegBal
3,100
(a)
40,000
16,000
(f)
(c)
18,000
3,000
(g)
(d)
1,000
9,000
(h)
500
(j)
EndBal
33,600
+ Supplies –
BegBal
900
EndBal
900
+ Accounts Receivable –
BegBal
0
(b)
20,000
18,000
(c)
EndBal
2,000
+ Prepaid Rent –
BegBal
0
(h)
9,000
EndBal
9,000
+ Prepaid Insurance –
BegBal
0
(g)
3,000
EndBal
3,000
+ Property, Plant & Equipment –
BegBal
21,000
EndBal
21,000
– Accounts Payable +
0
BegBal
250
(i)
250
EndBal
– Notes Payable +
15,000
BegBal
15,000
EndBal
– Unearned Revenue +
0
BegBal
(e)
1,000
1,000
(d)
0
EndBal
– Common Stock +
10,000
BegBal
10,000
EndBal
– Retained Earnings +
0
BegBal
0
EndBal
– Revenue +
0
BegBal
40,000
(a)
20,000
(b)
1,000
(e)
61,000
EndBal
+ Wage Expense –
BegBal
0
(f)
16,000
EndBal
16,000
+ Utilities Expense –
BegBal
0
(j)
500
EndBal
500
+ Telephone Expense –
BegBal
0
(i)
250
EndBal
250
HANDOUT 3–2
PREPARATION OF UNADJUSTED TRIAL BALANCE
Use the balances in the T-accounts in Handout 3–1 to prepare an unadjusted trial balance.
World Wide Webster
Unadjusted Trial Balance
January 31, 2016
Account
Debit
Credit
Cash
Supplies
Accounts Receivable
Prepaid Rent
Prepaid Insurance
Property, Plant & Equipment
Accounts Payable
Notes Payable
Unearned Revenue
Common Stock
Retained Earnings
Revenue
Wage Expense
Utilities Expense
Telephone Expense
Totals
HANDOUT 3–2 SOLUTION
PREPARATION OF UNADJUSTED TRIAL BALANCE
Use the balances in the T-accounts in Handout 3–1 to prepare an unadjusted trial balance.
World Wide Webster
Unadjusted Trial Balance
January 31, 2016
Account
Debit
Credit
Cash
$33,600
Supplies
900
Accounts Receivable
2,000
Prepaid Rent
9,000
Prepaid Insurance
3,000
Property, Plant & Equipment
21,000
Accounts Payable
$ 250
Notes Payable
15,000
Unearned Revenue
0
Common Stock
10,000
Retained Earnings
0
Revenue
61,000
Wage Expense
16,000
Utilities Expense
500
Telephone Expense
250
Totals
$86,250
$86,250