I. More Practice Recording Transactions
The transactions in this section relate to a small retail electronic store (“Jimbo”).
1. Jimbo sells a television for $500 cash. The television had cost Jimbo’s $400.
Date / Description / Debits / Credits2. Jimbo purchases $2,000 worth of merchandise on credit
Date / Description / Debits / Credits3. Jimbo makes payment in full for the merchandise purchased in question 2.
Date / Description / Debits / Credits4. Jimbo receives and pays immediately the electric bill in the amount of $300.
Date / Description / Debits / Credits5. Jimbo sells a music system on credit in the amount of $1,500. The music system had cost Jimbo’s $1,200.
Balance Sheet / Income StatementASSETS / LIABILITIES / EQUITY / REVENUE / EXPENSES / NET INCOME
6. Jimbo receives a $800 check in the mail from the customer in question 5.
Balance Sheet / Income StatementASSETS / LIABILITIES / EQUITY / REVENUE / EXPENSES / NET INCOME
7. Jimbo purchases with cash a new display stand for the store in the amount of $600.
Balance Sheet / Income StatementASSETS / LIABILITIES / EQUITY / REVENUE / EXPENSES / NET INCOME
8. Jimbo takes out a $4,000 business loan from its bank.
Balance Sheet / Income StatementASSETS / LIABILITIES / EQUITY / REVENUE / EXPENSES / NET INCOME
II. Thinking about an accounting cycle
Bead-It (a small retail bead store) began the year with the following balances:
Account / BalanceCash / $5,000
Retained Earnings / $5,000
Notes Payable / $19,000
Accounts Receivable / $2,000
Property / $25,000
Accounts Payable / $1,000
Inventory / $8,000
Capital Stock / $15,000
During the year, Bead-It had the following transactions occur:
a. Bead-It purchased $2,000 (in cash) worth of beads.
Date / Description / Debits / CreditsASSETS = / LIABILITIES + / EQUITY / REVENUE / - EXPENSES / = NET INCOME
b. Bead-It sold $3,000 worth of beads on credit. The beads had cost Bead-It $2,000.
Date / Description / Debits / CreditsASSETS = / LIABILITIES + / EQUITY / REVENUE / - EXPENSES / = NET INCOME
c. Bead-It paid employees wages of $1,000.
Date / Description / Debits / CreditsASSETS = / LIABILITIES + / EQUITY / REVENUE / - EXPENSES / = NET INCOME
d. Bead-It sold $2,000 worth of beads for cash. The beads had cost Bead-It $1,500.
Date / Description / Debits / CreditsASSETS = / LIABILITIES + / EQUITY / REVENUE / - EXPENSES / = NET INCOME
e. Bead-It paid a dividend to owners in the amount of $1,000.
Date / Description / Debits / CreditsASSETS = / LIABILITIES + / EQUITY / REVENUE / - EXPENSES / = NET INCOME
Now, construct the Income Statement for the year and the ending Balance Sheet.
Assume you keep the books for a small engineering firm. Make the following journal entries for each transaction on the date it occurred and the adjusting entry at the end of the accounting period (e.g, Dec. 31)
(1) On July 1, the firm signs a contract with a city planning department for $60,000 to design a bridge. The design work will be done in equal monthly installments and last one year. The city pays the full amount in advance – on July 1.
On July 1, the following would be recorded.
Account / Debit / CreditOn Dec. 31, the following would be recorded.
Account / Debit / Credit(2) On Oct. 1, the firm pays the insurance premiums on its fleet of cars for the next 6 months. The monthly premiums run $300.
On Oct. 1, the following would be recorded.
Account / Debit / CreditOn Dec. 31, the following would be recorded.
Account / Debit / Credit(3) On July 1, the firm pays the yearly dues of its 20 employees to the Academy of American Engineers. The yearly dues per employee are $100.
On July 1, the following would be recorded.
Account / Debit / CreditOn Dec. 31, the following would be recorded.
Account / Debit / Credit(4) On May 15th, the firm purchases office supplies on credit in the amount of $5000. The inventory of office supplies on December 31st comes to $500.
On May 15, the following would be recorded.
Account / Debit / CreditOn Dec. 31, the following would be recorded.
Account / Debit / CreditThe transactions in this section relate to a financial counseling service (‘URMoney’)
1. URMoney pays salaries on the 15th of every month. The salaries amount to $1,000 each month. What will be the required adjusting entry on December 31?
On Dec. 15th 2008 (for example), the following would be recorded.
Account / Debit / CreditOn Dec. 31, the following would be recorded.
Account / Debit / CreditOn Jan. 15th 2009, the following would be recorded
Account / Debit / Credit2. On Oct. 1, URMoney received $4,000 to provide counseling services for the next four months. What will be the required adjusting entry on December 31?
On Oct.. 1, the following would be recorded.
Account / Debit / CreditOn Dec. 31, the following would be recorded.
Account / Debit / Credit3. On October 1, URMoney paid the yearly $1,200 premium for fire & theft insurance (or, $100 monthly premium). What will be the required adjusting entry on December 31?
On Oct. 1, the following would be recorded.
Account / Debit / CreditOn Dec. 31, the following would be recorded.
Account / Debit / Credit4. URMoney publishes financial statements on December 31. The statements indicate the following account balances: Cash $10,000; Building $50,000; Revenue $5,000; Notes Payable $12,000; Accounts Payable $2,000; Salary expenses $3,000; Accounts Receivable $500; Retained Earnings $100,000; Dividends $1,000. What are the closing entries required to prepare for the next accounting cycle? On Dec. 31, the following would be recorded.
Account / Debit / CreditAccount / Debit / Credit
Account / Debit / Credit