Question

Problem 4-5B Record transactions, post to the Cash T-account, and prepare the statement of cash flows (LO4-7)

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Peter loves dogs and cats. For the past several years, he has owned and operated Homeward Bound, which temporarily houses pets while their owners go on vacation. For the month of June, the company has the following transactions:

June   2 Obtain cash by borrowing $21,000 from the bank by signing a note.
June   3 Pay rent for the current month, $1,500.
June 7 Provide services to customers, $3,800 for cash and $2,100 on account.
June 11 Purchase cages and equipment necessary to maintain the animals, $7,000 cash.
June 17 Pay employees’ salaries for the first half of the month, $5,100.
June 22 Pay dividends to stockholders, $1,200.
June 25 Receive cash in advance from a customer who wants to house his two dogs (Chance and Shadow) and cat (Sassy) while he goes on vacation the month of July, $1,400.
June 28 Pay utilities for the month, $1,900.
June 30 Record salaries earned by employees for the second half of the month, $5,100. Payment will be made on July 2.

6.

value:
1.00 points

Required information

Problem 4-5B Part 1

Required:

1. Record each transaction. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

7.

value:
1.00 points

Required information

Problem 4-5B Part 2

2. Identify the transactions involving cash. (Select all that apply.)

June 2

June 3

June 7

June 11

June 17

June 22

June 25

June 28

June 30

8.

value:
1.00 points

Required information

Problem 4-5B Part 3

3. Assuming the balance of cash at the beginning of June is $13,300, post each cash transaction to the Cash T-account.

9.

value:
1.00 points

Required information

Problem 4-5B Part 4

4. Prepare a statement of cash flows for the month of June, properly classifying each of the cash transactions into operating, investing, and financing activities. Assume that the balance of cash at the beginning of October is $13,300. (List cash outflows and decrease in cash as negative amounts. Total entries from the same source together when entering in the statement of cash flows.)
  

Answer 1

Solution

Homeward Bound

4-5B Part 1 –

Journal Entries:

Journal Entries:
Date	Account Titles and Explanation	Ref. Post	Debit	Credit
2-Jun	Cash		$21,000
	Note Payable			$21,000
	(To record cash borrowed through issue of note payable)
3-Jun	Rent Expense		$1,500
	Cash			$1,500
	(To record rent paid)
7-Jun	Cash		$3,800
	Accounts Receivable		$2,100
	Service Revenue			$5,900
	(To record services performed for cash and on account)
11-Jun	Equipment		$7,000
	Cash			$7,000
	(To record purchase of cages and equipment)
17-Jun	Salaries Expense		$5,100
	Cash			$5,100
	(To record half month salaries paid)
22-Jun	Dividends		$1,200
	Cash			$1,200
	(To record dividends paid)
25-Jun	Cash		$1,400
	Unearned Service Revenue			$1,400
	(To record advance received from customer)
28-Jun	Utilities Expense		$1,900
	Cash			$1,900
	(to record utilities paid)
30-Jun	Salaries Expense		$5,100
	Salaries Payable			$5,100
	(To record accrued salaries)

Part – 2

Transactions involving cash -
2-Jun	cash borrowed	cash inflow
3-Jun	Rent paid	cash outflow
7-Jun	Service revenue	cash inflow
11-Jun	purchase of equipment	cash outflow
17-Jun	Salaries paid	cash outflow
22-Jun	dividends paid	cash outflow
25-Jun	advance received	cash inflow
28-Jun	utilities paid	cash outflow

The June 30 entry is about recording unpaid salaries for the second half of the month. There is no cash transaction as the salaries are expected to be paid on July 2. Hence, this is a non-cash item.

Cash Account

	Cash
Debit				Credit
Description	Amount	Date	Description	Amount
Beg. Balance	$13,300	3-Jun	Rent Expense	$1,500
Note Payable	$21,000	11-Jun	Equipment	$7,000
Service Revenue	$3,800	17-Jun	Salaries Expense	$5,100
Unearned Revenue	$1,400	22-Jun	Dividends	$1,200
		28-Jun	Utilities Expense	$1,900
		30-Jun	Ending Balance	$22,800
Totals	$39,500			$39,500
Ending Balance	$22,800

Part – 4:

Statement of Cash Flows:

Homeward Bound
for the month ended June 30
Statement of Cash Flow
Cash flows from operating activities:
Receipts from customers	$3,800
payments for operating expenses -
rent expense	($1,500)
salaries expense	($5,100)
utilities expense	($1,900)
total operating expenses	($8,500)
advance received from customer	$1,400
Cash flows from operating activities	($3,300)
Cash flows from investing activities:
Purchase of equipment	($7,000)
Cash flow from investing activities	($7,000)
Cash flow from financing activities:
issue of note payable	$21,000
dividends paid	($1,200)
cash flow from financing activities	$19,800
Net Increase in Cash	$9,500
Beginning balance	$13,300
Ending balance	22,800