P2-38B Journalizing transactions, posting journal entries to four-column accounts, and preparing
a trial balance
Learning Objectives 3, 4
3. Cash Balance $11,000
The trial balance of James Howe, CPA, is dated March 31, 2017:
During April, the business completed the following transactions:
Requirements
1. Record the April transactions in the journal using the following accounts: Cash; Accounts
Receivable; Office Supplies; Furniture; Automobile; Land; 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; Furniture, 14; Automobile, 15; Land, 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 James Howe, CPA, at April 30, 2017.
SOLUTION
Requirement 1
Date
Accounts and Explanation
Posting
Ref.
Debit
Credit
Apr. 4
Cash
11
2,000
Accounts Receivable
12
2,000
Received cash from client on account.
Accounts Receivable
12
5,400
Service Revenue
41
5,400
account.
13
Accounts Payable
21
3,300
Cash
11
3,300
Paid cash on account.
14
Furniture
14
4,600
Accounts Payable
21
4,600
Purchased furniture on account.
15
Automobile
15
10,000
Common Stock
31
10,000
Issued common stock in exchange for
automobile.
18
Office Supplies
13
1,000
Accounts Payable
21
1,000
Purchased office supplies on account.
19
Cash
11
2,700
Accounts Receivable
12
2,700
Received cash on account.
20
Dividends
33
4,000
Cash
11
4,000
Cash dividends were paid to stockholders.
21
Cash
11
3,800
Service Revenue
41
3,800
Received cash for consulting work.
24
Cash
11
1,400
P2-38B, cont.
Rent Expense
52
600
11
600
Salaries Expense
51
11
Requirements 2 and 3
Account No. 11
Date
Item
Post Ref.
Debit
Credit
Balance
Debit
Credit
Mar. 31
Balance
10,000
Apr. 4
J5
2,000
12,000
Apr. 13
J5
3,300
8,700
Apr. 19
J5
2,700
11,400
Apr. 20
J5
4,000
7,400
Apr. 21
J5
3,800
11,200
Apr. 24
J5
1,400
12,600
Apr. 27
J5
12,000
Apr. 28
J5
1,000
11,000
Account No. 12
Date
Item
Post Ref.
Debit
Credit
Balance
Debit
Credit
Mar. 31
Balance
7,500
Apr. 4
J5
2,000
5,500
Apr. 8
J5
5,400
10,900
Apr. 19
J5
2,700
8,200
Account No. 13
Date
Item
Post Ref.
Debit
Credit
Balance
Debit
Credit
Mar. 31
Balance
Apr. 18
J5
1,000
1,400
P2-38B, cont.
Account No. 14
Date
Item
Post Ref.
Debit
Credit
Balance
Debit
Credit
Apr. 14
J5
4,600
4,600
Account No. 15
Date
Item
Post Ref.
Debit
Credit
Balance
Debit
Credit
Apr. 15
J5
10,000
Account No. 16
Date
Item
Post Ref.
Debit
Credit
Balance
Debit
Credit
Mar. 31
Balance
Account No. 21
Date
Item
Post Ref.
Debit
Credit
Balance
Debit
Credit
Mar. 31
Balance
4,200
Apr. 13
J5
3,300
900
Apr. 14
J5
4,600
5,500
Apr. 18
J5
1,000
6,500
Account No. 22
Date
Item
Post Ref.
Debit
Credit
Balance
Debit
Credit
Apr. 24
J5
1,400
1,400
Account No. 31
Date
Item
Post Ref.
Debit
Credit
Balance
Debit
Credit
Mar. 31
Balance
33,300
Apr. 15
J5
10,000
43,300
Account No. 33
Date
Item
Post Ref.
Debit
Credit
Balance
Debit
Credit
P2-38B, cont.
Account No. 41
Date
Item
Post Ref.
Debit
Credit
Balance
Debit
Credit
Mar. 31
Balance
10,800
Apr. 8
J5
16,200
Apr. 21
J5
20,000
Account No. 51
Date
Item
Post Ref.
Debit
Credit
Balance
Debit
Credit
Mar. 31
Balance
2,500
Apr. 28
J5
3,500
Account No. 52
Date
Item
Post Ref.
Debit
Credit
Balance
Debit
Credit
Mar. 31
Balance
900
Apr. 27
J5
600
1,500
Requirement 4
JAMES HOWE, CPA
Trial Balance
April 30, 2017
Acct. No.
Account Title
Balance
Debit
Credit
11
Cash
$ 11,000
12
Accounts Receivable
13
Office Supplies
14
Furniture
15
Automobile
16
Land
21
Accounts Payable
22
Unearned Revenue
31
Common Stock
33
Dividends
41
Service Revenue
51
Salaries Expense
52
Rent Expense
P2-39B Correcting errors in a trial balance
Learning Objective 4
Total Debits $122,400
The trial balance of Learn for Life Child Care does not balance.
The following errors are detected:
a. Cash is understated by $1,800.
b. A $3,900 debit to Accounts Receivable was posted as a credit.
c. A $1,200 purchase of office supplies on account was neither journalized nor posted.
d. Equipment was incorrectly transferred from the ledger as $89,300. It should have been transferred as
$81,500.
e. Salaries Expense is overstated by $500.
f. A $600 cash payment for advertising expense was neither journalized nor posted.
g. A $100 cash dividend was incorrectly journalized as $1,000.
h. Service Revenue was understated by $4,200.
i. A 12-month insurance policy was posted as a $1,300 credit to Prepaid Insurance. Cash was posted
correctly.
Prepare the corrected trial balance as of May 31, 2017. Journal entries are not required.
SOLUTION
LEARN FOR LIFE CHILD CARE
Trial Balance
May 31, 2017
Account Title
Balance
Debit
Credit
Cash
$ 10,500
Accounts Receivable
15,900
Office Supplies
2,100
Prepaid Insurance
3,600
Equipment
81,500
Accounts Payable
Notes Payable
Common Stock
Dividends
2,700
Service Revenue
Salaries Expense
Rent Expense
Advertising Expense
Total
Explanations:
a. Increase Cash by $1,800.
b. Increase Accounts Receivable by $7,800 ($3,900 × 2).
c. Increase Office Supplies and Accounts Payable by $1,200 each.
P2-40B Preparing financial statements from the trial balance and calculating the debt ratio
Learning Objectives 4, 5
1. Net Income $7,508
The trial balance as of July 31, 2017, for Sarah Silk, Registered Dietician, is presented below:
Requirements
1. Prepare the income statement for the month ended July 31, 2017.
2. Prepare the statement of retained earnings for the month ended July 31, 2017. The beginning balance
of retained earnings was $0.
3. Prepare the balance sheet as of July 31, 2017.
4. Calculate the debt ratio as of July 31, 2017.
SOLUTION
Requirement 1
SARAH SILK, REGISTERED DIETICIAN
Income Statement
Month Ended July 31, 2017
Revenues:
Service Revenue
$ 9,858
Expenses:
$ 1,300
Net Income
$ 7,508
Requirement 2
SARAH SILK, REGISTERED DIETICIAN
Statement of Retained Earnings
Month Ended July 31, 2017
Retained Earnings, July 1, 2017
$ 0
Net income for the month
Dividends
Retained Earnings, July 31, 2017
P2-40B, cont.
Requirement 3
SARAH SILK, REGISTERED DIETICIAN
Balance Sheet
July 31, 2017
Assets
Liabilities
Cash
$ 30,000
Accounts Payable
$ 3,400
Accounts Receivable
Unearned Revenue
Office Supplies
Notes Payable
Prepaid Insurance
Total Liabilities
$ 33,592
Equipment
Common Stock
Retained Earnings
Requirement 4
P2-41 Journalizing transactions, posting to T-accounts, and preparing a trial balance
Problem P2-41 continues with the consulting business begun in Problem P1-54 in Chapter 1. Here you
will account for Daniels Consulting’s transactions as it is actually done in practice.
Daniels Consulting completed the following transactions during December 2016:
Requirements
1. Journalize the transactions, using the following accounts: Cash; Accounts Receivable; Office
Supplies; Equipment; Furniture; Accounts Payable; Unearned Revenue; Common Stock; Dividends;
Service Revenue; Rent Expense; and Utilities Expense. Explanations are not required.
2. Open a T-account for each of the accounts.
3. Post the journal entries to the T-accounts, and calculate account balances. Formal posting references
are not required.
4. Prepare a trial balance as of December 31, 2016.
5. Prepare the income statement of Daniels Consulting for the month ended December 31, 2016.
6. Prepare the statement of retained earnings for the month ended December 31, 2016.
7. Prepare the balance sheet as of December 31, 2016.
8. Calculate the debt ratio for Daniels Consulting at December 31, 2016.
SOLUTION
Requirement 1
Date
Accounts and Explanation
Posting
Ref.
Debit
Credit
Dec. 2
Cash
20,000
Common Stock
20,000
2
Rent Expense
2,000
Cash
2,000
3
Equipment
3,600
Cash
3,600
4
Furniture
3,000
Accounts Payable
3,000
5
Office Supplies
800
Accounts Payable
800
9
Accounts Receivable
2,500
Service Revenue
2,500
12
Utilities Expense
150
Cash
150
18
Cash
2,100
Service Revenue
2,100
21
2,400
Unearned Revenue
2,400
21
26
Accounts Payable
200
Cash
200
28
400
Accounts Receivable
400
30
Dividends
1,000
Cash
1,000