Question

Please answer each question and show calculation/ provide explanations. Thank you so much.

Question 1

You have just been hired as the staff accountant for Maximum Corporation. However, the accounting manager is unclear about your ability to determine where certain increases and decreases should be placed. Indicate in the columns below by placing a check-mark (√        ) in the appropriate column identified.

Office rent is increased.                                  

Service Revenue is increased.

Prepaid Expense is reduced.

Cash is decreased.

Plant and machinery are increased.

Capital is increased.

Utility expense is increased.

Paid salary

Cash is increased.

Accounts Payable is decreased.

	Debit		Credit
a		a
b		b
c		c
d		d
e		e
f		f
g		g
h		h
i		i
j		j

Question 2

For the following transactions shown below, you are required to 1) prepare the journal entries, 2) post the T-accounts, and 3) extract the trial balance.

Newbell Dry Cleaning Company opened its business bank account by depositing $60,000 on August 1.

Purchased supplies for $1,100 cash

Purchased dry cleaning equipment from Sears Corporation for $17,500, making a down payment of $7,500 cash. The remainder is placed on account.

Paid rent for the month in the amount of $4,12

Cash sales for the month were $9,250.

Paid salaries of $1,875 cash.

Paid Sears $2,500 cash on account.

The cost of supplies used for the month was $300.

On August 1, the company purchased insurance costing $12,000 (12 months).

Adjust the books to reflect insurance consumed for the month as $1,000.

Question 3

As the senior accountant for Great Wall, Inc., one of your responsibilities at month’s end is to prepare the Adjusting Journal Entries (AJEs) for submission to the accounting manager. Prepare the AJEs based on the following information.

Of the total supplies purchased for $4,000, it was determined that $1,500 was used.

Prior insurance transactions show that at the time of purchase, insurance prepayment was $24,000 for the 24 months. Assume that $8,000 was consumed for the period under review.

Assume that $3,600 received as commission was credited to the unearned commission account. It was determined that earned commission was deemed to be $1,200.

Unpaid salary was calculated as $5,000.

Unpaid utilities were determined as $1,600.

Answer 1

Que 1	Expense and assets are debit-any increase will be debited and decrease will be credited. Income & Liability-Reverse
	Office rent is increased.	Debit	Expense
	Service Revenue is increased.	Credit	Income
	Prepaid Expense is reduced.	Credit	Asset
	Cash is decreased.	Credit	Asset
	Plant and machinery are increased.	Debit	Asset
	Capital is increased.	Credit	Capital/Liability
	Utility expense is increased.	Debit	Expense
	Paid salary	Debit	if we assume it expense as salary, will be debit. If we assume asset as cash paid, will be credit
	Cash is increased.	Debit	Asset
	Accounts Payable is decreased.	Debit	Liability

Que 2
Date	Account	Debit	Credit
Aug 1	Cash	60000
	Capital		60000
	Office Supplies	1100
	Cash		1100
	Equipment	17500
	Cash		7500
	Accounts Payable		10000
	Rent Expense	412
	Cash		412
	Cash	9250
	Sale Revenue		9250
	Salary Expense	1875
	Cash		1875
	Accounts Payable	2500
	Cash		2500
	Office Supplies Expenses	300
	OffiCe supplies		300
Aug 1	Prepaid Insurance	12000
	Cash		12000
Adj Entry	Insurance Expense (12000/12)	1000
	Prepaid Insurance		1000

Account:

Cash
Cash Debit Credit Balance Cash 60000 60000 1100 58900 7500 51400 412 50988 9250 60238 1875 58363 2500 55863 12000 43863
Office Supplies
	Debit	Credit	Balance
Office Supplies	1100		1100
		300	800
Equipment
	Debit	Credit	Balance
Equipment	17500		17500
		0	17500
AccountS Payable
	Debit	Credit	Balance
AccountS Payable	0	10000	10000
	2500	0	7500
Rent Expense
	Debit	Credit	Balance
Rent Expense	412		412
		0	412
Sales Revenue
	Debit	Credit	Balance
Sales Revenue	0	9250	9250
		0	9250
Salaries
	Debit	Credit	Balance
Salaries	1875		1875
		0	1875
Office Supplies Expense
	Debit	Credit	Balance
Office Supplies Expense	300		300
		0	300
Insurance
	Debit	Credit	Balance
Insurance	1000		1000
		0	1000
Prepaid Insurance
	Debit	Credit	Balance
Prepaid Insurance	12000		12000
		1000	11000

Trial:

Trial
		Debit	Credit
Capital			60000
Cash		43863
Office Supplies		800
Equipment		17500
Prepaid Insurance		11000
Sales Revenue			9250
Rent Expense		412
Salary Expense		1875
Office Supplies Expense		300
Insurance Exp		1000
Accounts Payable			7500

Que 3

S NO	Account	Debit	Credit
1	Office Supplies Exp	1500
	Office Supplies		1500
	(4000 which is suppli purchased and debited to Office supplies now will be reduced by 1500 which is expensed off by debited office supplies expenses)
2	Insurance Expense	8000
	Prepaid Insurance		8000
	(out of 24000 prepaid, now 8000 will be expensed off)
3	Unearned Commission	1200
	Earned Commission Revenue		1200
4	Salary Expense Debit	5000
	Salary Payable Credit		5000
	(Not paid hence credited to salary payable)
5	Utility Expense Debit	1600
	Accounts Payable Credit	1600