Valley Realty acts as an agent in buying, selling, renting, and managing real estate. The unadjusted trial balance on July 31, 2019, follows:
Valley Realty Unadjusted Trial Balance July 31, 2019 Account
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 52,500 Accounts Receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 100,100 Prepaid Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 12,600 Office Supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 2,800 Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 — Accounts Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 21,000 Unearned Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 — Notes Payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 — Cindy Getman, Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 87,500 Cindy Getman, Drawing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 44,800 Fees Earned. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 591,500 Salary and Commission Expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 385,000 Rent Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 49,000 Advertising Expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 32,200 Automobile Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 15,750 Miscellaneous Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 5,250
The following business transactions were completed by Valley Realty during August 2019:
Aug.
1. Purchased office supplies on account, $3,150.
2. Paid rent on office for month, $7,200.
3. Received cash from clients on account, $83,900.
5. Paid insurance premiums, $12,000.
9. Returned a portion of the office supplies purchased on August 1, receiving full credit for their cost, $400.
Aug.
17. Paid advertising expense, $8,000.
23. Paid creditors on account, $13,750.
Enter the following transactions on Page 19 of the two-column journal:
29. Paid miscellaneous expenses, $1,700.
30. Paid automobile expense (including rental charges for an automobile), $2,500.
31. Discovered an error in computing a commission during July; received cash from the salesperson for the overpayment, $2,000.
31. Paid salaries and commissions for the month, $53,000.
31. Recorded revenue earned and billed to clients during the month, $183,500.
31. Purchased land for a future building site for $75,000, paying $7,500 in cash and giving a note payable for the remainder.
31. Withdrew cash for personal use, $1,000.
31. Rented land purchased on August 31 to a local university for use as a parking lot during football season (September, October, and November); received advance payment of $5,000.
Instructions
1. Record the August 1 balance of each account in the appropriate balance column of a four-column account, write Balance in the item section, and place a check mark (¸) in the Posting Reference column.
2. Journalize the transactions for August in a two-column journal beginning on Page 18.
Journal entry explanations may be omitted.
3. Post to the ledger, extending the account balance to the appropriate balance column after each posting.
4. Prepare an unadjusted trial balance of the ledger as of August 31, 2019.
5. Assume that the August 31 transaction for Cindy Getman’s cash withdrawal should have been $10,000. (a) Why did the unadjusted trial balance in (4) balance? (b) Journalize the correcting entry. (c) Is this error a transposition or slide?
Answer:
2. and 3.
Page 18
Post.
Ref. Debit Credit
2019
Aug. 1 Office Supplies14 3,150
Accounts Payable 21 3,150
2 Rent Expense52 7,200
Cash11 7,200
3 Cash11 83,900
Accounts Receivable 12 83,900
5 Prepaid Insurance13 12,000
Cash11 12,000
9 Accounts Payable21 400
Office Supplies14 400
17 Advertising Expense 53 8,000
Cash11 8,000
23 Accounts Payable21 13,750
Cash11 13,750
Page 19
Post.
Ref. Debit Credit
2019
Aug. 29 Miscellaneous Expense 59 1,700
Cash11 1,700
30 Automobile Expense 54 2,500
Cash11 2,500
31 Cash11 2,000
Salary and Commission Expense 51 2,000
31 Salary and Commission Expense 51 53,000
Cash11 53,000
31 Accounts Receivable 12 183,500
Fees Earned41 183,500
31 Land16 75,000
Cash11 7,500
Notes Payable23 67,500
31 Cindy Getman, Drawing 32 1,000
Cash11 1,000
31 Cash11 5,000
Unearned Rent22 5,000
1. and 3.
Account No. 11
Post.
Item Ref. Debit Debit Credit
2019
Aug. 1 Balance 52,500
2 1845,300
3 18 83,900 129,200
5 18117,200
17 18109,200
23 1895,450
29 1993,750
30 1991,250
31 19 2,000 93,250
31 1940,250
31 1932,750
31 1931,750
31 19 5,000 36,750
Account No. 12
Post.
Item Ref. Debit Debit Credit
2019
Aug. 1 Balance 100,100
3 1816,200
31 19 183,500 199,700
Account No. 13
Post.
Item Ref. Debit Credit Debit Credit
2019
Aug. 1 Balance 12,600
5 18 12,000 24,600
Account No. 14
Post.
Item Ref. Debit Credit Debit Credit
2019
Aug. 1 Balance 2,800
1 18 3,150 5,950
9 18 400 5,550
Account No. 16
Post.
Item Ref. Debit Credit Debit Credit
2019
Aug. 31 19 75,000 75,000
Account No. 21
Post.
Item Ref. Debit Credit Debit Credit
2019
Aug. 1 Balance 21,000
1 18 3,150 24,150
9 18 40023,750
23 18 13,75010,000
Account No. 22
Post.
Item Ref. Debit Credit Debit Credit
2019
Aug. 31 19 5,000 5,000
Account No. 23
Post.
Item Ref. Debit Credit Debit Credit
2019
Aug. 31 19 67,500 67,500
Account No. 31
Post.
Item Ref. Debit Credit Debit Credit
2019
Aug. 1 Balance 87,500
Account No. 32
Post.
Item Ref. Debit Credit Debit Credit
2019
Aug. 1 Balance 44,800
31 19 1,000 45,800
Account No. 41
Post.
Item Ref. Debit Credit Debit Credit
2019
Aug. 1 Balance 591,500
31 19 183,500 775,000
Account No. 51
Post.
Item Ref. Debit Credit Debit Credit
2019
Aug. 1 Balance 385,000
31 19 2,000 383,000
31 19 53,000 436,000
Account No. 52
Post.
Item Ref. Debit Credit Debit Credit
2019
Aug. 1 Balance 49,000
2 18 7,200 56,200
Account No. 53
Post.
Item Ref. Debit Credit Debit Credit
2019
Aug. 1 Balance 32,200
17 18 8,000 40,200
Account No. 54
Post.
Item Ref. Debit Credit Debit Credit
2019
Aug. 1 Balance 15,750
30 19 2,500 18,250
Account No. 59
Post.
Item Ref. Debit Credit Debit Credit
2019
Aug. 1 Balance 5,250
29 19 1,700 6,950
4.
Account Debit Credit
No. Balances Balances
Cash11 36,750
Accounts Receivable12 199,700
Prepaid Insurance13 24,600
Office Supplies14 5,550
Land16 75,000
Accounts Payable21 10,000
Unearned Rent22 5,000
Notes Payable23 67,500
Cindy Getman, Capital31 87,500
Cindy Getman, Drawing 32 45,800
Fees Earned41 775,000
Salary and Commission Expense 51 436,000
Rent Expense52 56,200
Advertising Expense53 40,200
Automobile Expense54 18,250
Miscellaneous Expense59 6,950
945,000 945,000
5. (a) The unadjusted trial balance in (4) still balances because the debits equaled
the credits in the original journal entry.
(b) The correcting entry for $9,000 ($10,000 – $1,000) would be as follows:
2019
Aug. 31 Cindy Getman, Drawing 32 9,000
Cash11 9,000
(c) Slide
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