Question

Below are several transactions for Crimson Tide Corporation. A junior accountant, recently employed by the company, proposes to record the following transactions.
External Transaction Accounts Debit Credit
1. Pay cash dividends of $800 to stockholders. Cash 800
Dividends 800
2. Provide services on account for customers, $3,400. Cash 3,400
Service Revenue 3,400
3. Pay a $500 utilities bill for the current period. Utilities Expense 500
Cash 500
4. Receive cash of $400 from previously billed customers. Cash 400
Service Revenue 400
5. Pay for supplies previously purchased on account, $1,200. Supplies Expense 1,200
Cash 1,200

Required:
Provide a correct entry for each of the transactions classified as incorrect

Answer 1

Answer:

Crimson Tide Corporation

 Accounts Titles             Debit      Credit

1. Dividends                     $800

  Cash                                          $800

To record payment of dividends.

2. Accounts Receivable $3,400

   Service Revenue                     $3,400

To record provision of services on account.

3. correct

4. Cash                          $400

   Accounts Receivable                $400

To record the receipt of cash on account.

5. Accounts Payable    $1,200

   Cash                                           $1,200

To record payment on account.

Explanation:

The correct entries have been provided as above.  The first step in recording transactions in the journal is to recognize the accounts involved.  Then, identify which account is to be debited and which is to be credited, following basic accounting principle and based on the accounting equation of Assets = Liabilities + Equity.