Question

P2-2   (you can complete using journal entry or T-account format)

Darlene Cook Company engaged in the following transactions during the month of

July:

July 1 Acquired land for $10,000. The company paid cash.

8. Billed customers for $3,000. This represents an increase in revenue. The customer has

been billed and will pay at a later date. An asset, accounts receivable, has been created.

12. Incurred a repair expense for repairs of $600. Darlene Cook Company agreed to pay in 60 days. This transaction involves an increase in accounts payable and repair expense.

15. Received a check for $500 from a customer who was previously billed. This is a reduction in accounts receivable.

20. Paid $300 for supplies. This was previously established as a liability, account payable. Paid wages in the amount 24. of $400. This was for work performed during July.

Required Record the transactions, using T-accounts.

P2-3    (you can complete using journal entry or T-account format)

Gaffney Company had these adjusting entry situations at the end of December.

1. On July 1, Gaffney Company paid $1,200 for a one-year insurance policy. The policy was for the period July 1 through June 30. The transaction was recorded as prepaid insurance and a reduction in cash.

2. On September 10, Gaffney Company purchased $500 of supplies for cash. The purchase was recorded as supplies. On December 31, it was determined that various supplies had been consumed in operations and that supplies costing $200 remained on hand.

3. Gaffney Company received $1,000 on December 1 for services to be performed in the following year. This was recorded on December 1 as an increase in cash and as revenue. As of December 31, this needs to be recognized as Unearned Revenue, a liability account.

4. As of December 31, interest charges of $200 have been incurred because of borrowed funds. Payment will not be made until February. A liability for the interest needs to be recognized, as does the interest expense.

5. As of December 31, a $500 liability for salaries needs to be recognized.

6. As of December 31, Gaffney Company had provided services in the amount of $400 for

Jones Company. An asset, Accounts Receivable, needs to be recognized along with the revenue.

Required Record the adjusting entries at December 31, using T-accounts.

Answer 1

P 2-2.

Cash					Land
Date	Debit	Credit	date		Date	Debit	Credit	date
Beg.Bal.		10000	July.1		Beg. Bal.
July.15	500	300	July.20		July.1	10000
		400	July.24
					Accounts Receivable
Service Revenue					Date	Debit	Credit	date
Date	Debit	Credit	date		Beg.Bal.		500	July.15
		3000	July.8		July.8	3000
Repair Expense					Accounts Payable
Date	Debit	Credit	date		Date	Debit	Credit	date
July.12	600							Beg.Bal.
					July.20	300	600	July.12
Wages Expense
Date	Debit	Credit	date
July.24	400

P 2-3

Prepaid Insurance					Insurance Expense
Date	Debit	Credit	date		Date	Debit	Credit	date
Beg.Bal.	1200	600	Dec.31		Dec.31	600
Supplies					Supplies Expense
Date	Debit	Credit	date		Date	Debit	Credit	date
Beg.Bal.	500	300	Dec.31		Dec.31	300
Service Revenue					Unearned Revenue
Date	Debit	Credit	date		Date	Debit	Credit	date
Dec.31	1000	400	Dec.31				1000	Dec.31
Interest Expense					Interest Payable
Date	Debit	Credit	date		Date	Debit	Credit	date
Dec.31	200						200	Dec.31
Salary Expense					Salary Payable
Date	Debit	Credit	date		Date	Debit	Credit	date
Dec.31	500						500	Dec.31
Accounts Receivable
Date	Debit	Credit	date
Dec.31	400