P2-38B Journalizing transactions, posting journal entries to four-column accounts, and
preparing a trial balance
Learning Objectives 3, 4
3. Cash Balance $20,250
The trial balance of John Menning, CPA, is dated March 31, 2018:
During April, the business completed the following transactions:
Apr. 4 Collected $6,000 cash from a client on account.
8 Performed tax services for a client on account, $5,500.
13 Paid $3,300 on account.
14 Purchased furniture on account, $4,000.
15 Menning contributed his personal automobile to the business in exchange for
common stock. The automobile had a market value of $11,500.
18 Purchased office supplies on account, $1,600.
19 Received $2,750 for tax services performed on April 8.
20 Paid cash dividends of $7,500.
21 Received $4,900 cash for consulting work completed.
24 Received $2,500 cash for accounting services to be completed next month.
27 Paid office rent, $900.
28 Paid employee salary, $1,200.
Requirements
1. Record the April transactions in the journal using the following accounts: Cash; Accounts
Receivable; Office Supplies; Land; Furniture; Automobile; Accounts Payable; Unearned
Revenue; Common Stock; Dividends; Service Revenue; Salaries Expense; and Rent Expense.
Include an explanation for each entry.
2. Open the four-column ledger accounts listed in the trial balance, together with their
balances as of March 31. Use the following account numbers: Cash, 11; Accounts Receivable,
12; Office Supplies, 13; Land, 14; Furniture, 15; Automobile, 16; Accounts Payable, 21;
Unearned Revenue, 22; Common Stock, 31; Dividends, 33; Service Revenue, 41; Salaries
Expense, 51; and Rent Expense, 52.
3. Post the journal entries to four-column accounts in the ledger, using dates, account
numbers, journal references, and posting references. Assume the journal entries were recorded on
page 5 of the journal.
4. Prepare the trial balance of John Menning, CPA, at April 30, 2018.
SOLUTION
P2-38B, cont.
P2-38B, cont.
Requirement 4
P2-39B Correcting errors in a trial balance
Learning Objective 4
The following errors are detected:
a. Cash is understated by $1,800.
b. A $3,800 debit to Accounts Receivable was posted as a credit.
c. A $1,000 purchase of office supplies on account was neither journalized nor posted.
d. Equipment was incorrectly transferred from the ledger as $90,400. It should have been
transferred as $82,500.
e. Salaries Expense is overstated by $350.
f. A $300 cash payment for advertising expense was neither journalized nor posted.
g. A $160 cash dividend was incorrectly journalized as $1,600.
h. Service Revenue was understated by $4,000.
i. A 12-month insurance policy was posted as a $1,400 credit to Prepaid Insurance. Cash was
posted correctly.
Prepare the corrected trial balance as of May 31, 2018. Journal entries are not required.
SOLUTION
P2-40B Preparing financial statements from the trial balance and calculating the debt ratio
Learning Objectives 4, 5
1. Net Income $13,404
The trial balance as of July 31, 2018, for Sheila Sanchez, Registered Dietician, is presented
below:
Requirements
1. Prepare the income statement for the month ended July 31, 2018.
2. Prepare the statement of retained earnings for the month ended July 31, 2018. The beginning
balance of retained earnings was $0.
3. Prepare the balance sheet as of July 31, 2018.
4. Calculate the debt ratio as of July 31, 2018.
SOLUTION
Requirement 1
