As the taxes are collected in cash, cash is debited and the receivable is credited. Assume no collection is made before due date (Feb, 28, in this case) and on due date 80,000 birr was received.
Answers
Answer:
Explanation:
Give some examples of source documents.
➢ Define an account. What are the two forms of account posting illustrated in the chapter?➢ What is meant by the term double-entry procedure, or duality?
➢ Describe how you would determine the balance of a T-account.
➢ Define debit and credit.
➢ Do you think this double entry accounting system makes sense? Can you conceive of other possible methods for recording changes in accounts?
➢ Which of the steps in the accounting cycle are performed throughout the accounting period?
➢ What is the purpose of the Dividends account and how is it increased?
➢ Describe the nature and purposes of the general journal. What does journalizing mean? Give an example of a compound entry in the general journal.
➢ Describe a ledger and a chart of accounts. How do these two compare with a book and its table of contents?
➢ Describe the act of posting.
➢ What types of accounts appear in the unadjusted trial balance? What are the purposes of this trial balance?
➢ You have found that the total of the Debits column of the trial balance of Burns Company is $ 200,000, while the total of the Credits column is $ 180,000. What are some possible causes of this difference? If the difference between the columns is divisible by 9, what types of errors are possible?
Exercises
Exercise A Prepare the journal entry required for each of the following transactions:
Cash was received for services performed for customers, $1,200.
Services were performed for customers on account, $4,200.
Exercise B Prepare the journal entry required for each of the following transactions:
Capital stock was issued for $ 200,000 cash.
A $ 30,000 loan was arranged with a bank. The bank increased the company’s checking account by $ 30,000 after management of the company signed a written promise to return the $ 30,000 in 30 days.
Cash was received for services performed for customers, $ 700.
Services were performed for customers on account, $ 1,200.
Exercise D For each of the following unrelated transactions, give the journal entry to record the transaction. Then show how the journal entry would be posted to T-accounts. You need not include explanations or account numbers.
Capital stock was issued for cash, $ 300,000.
Purchased trucks by signing a note bearing no interest, $ 210,000.
Earned service revenue on account, $ 4,800.
Collected the account receivable resulting from transaction (c), $ 4,800.
Paid the note payable for the trucks purchased, $ 210,000.
Paid utilities for the month in the amount of $ 1,800.
Paid salaries for the month in the amount of $ 7,500.
Incurred supplies expenses on account in the amount of $ 1,920.
Purchased another truck for cash, $ 48,000.
Performed delivery services on account, $ 24,000.
Exercise F Using the data in the previous problem, post the entries to T-accounts. Write the letter of the transaction in the account before the dollar amount. Determine a balance for each account.
Exercise G Using your answer for the previous exercise, prepare a trial balance. Assume the date of the trial balance is March 31.
Problems
Problem A The transactions of Lightning Package Delivery Company for March follow:
Mar. 1 The company was organized and issued capital stock for $ 300,000 cash.
2 Paid $ 6,000 as the rent for March on a completely furnished building.
5 Paid cash for delivery trucks, $ 180,000.
6 Paid $ 4,000 as the rent for March on two forklift trucks.
9 Paid $ 2,200 for supplies received and used in March.
12 Performed delivery services for customers who promised to pay $ 27,000 at a later date.
20 Collected cash of $ 4,500 from customers on account (see March 12 entry).
21 Received a bill for $ 1,200 for advertising in the local newspaper in March.
27 Paid cash for gas and oil consumed in March, $ 450.
31 Paid $ 2,400 salaries to employees for March.
31 Received an order for services at $ 12,000. The services will be performed in April.
31 Paid cash dividend, $ 1,000.
Prepare the journal entries required to record these transactions in the general journal of the company.
Problem B Economy Laundry Company had the following transactions in August:
Aug. 1 Issued capital stock for cash, $ 150,000.
3 Borrowed $ 40,000 from the bank on a note.
4 Purchased cleaning equipment for $ 25,000 cash.
6 Performed services for customers who promised to pay later, $ 16,000.
7 Paid this month’s rent on a building, $ 2,800.
10 Collections were made for the services performed on August 6, $ 3,200.
14 Supplies were purchased on account for use this month, $ 3,000.
17 A bill for $ 400 was received for utilities for this month.
25 Laundry services were performed for customers who paid immediately, $ 22,000.
31 Paid employee salaries, $ 6,000.
31 Paid cash dividend, $ 2,000.
Required:
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