Question

The following selected transactions were completed during July of the current year: July 1 Billed customers for fees earned, $72,960. 4 Purchased supplies on account, $1,900. 8 Received cash from customers on account, $65,960. 11 Paid creditors on account, $840. Required: a. Journalize these transactions in a two-column journal. Refer to the list of accounts in the T accounts for exact wording of account titles. b. Post the entries prepared in (a) to the following T accounts: Cash, Supplies, Accounts Receivable, Accounts Payable, Fees Earned. To the left of each amount posted in the accounts, select the appropriate date. c. Assume that the unadjusted trial balance on July 31 shows a credit balance for Accounts Receivable. Does this credit balance mean an error has occurred

Answer 1

Answer:

a. Journal Entries:

July 1 Debit Accounts receivable, $72,960

Credit Fees Earned $72,960

To record fees earned.

July 4 Debit Supplies $1,900

Credit Accounts payable $1,900

To record supplies purchased on account.

July 8 Debit Cash $65,960

Credit Accounts receivable $65,960

To record cash received from customers on account.

July 11 Debit Accounts payable $840

Credit Cash $840

To record payment to creditors on account.

Cash

Date     Account Titles            Debit     Credit

July 8  Accounts receivable $65,960

July 11 Accounts payable                      $840

Supplies

Date     Account Titles            Debit     Credit

July 4   Accounts payable    $1,900

Accounts Receivable

Date     Account Titles            Debit     Credit

July 1   Fees Earned           $72,960

July 8  Cash                                      $65,960

Accounts Payable

Date     Account Titles            Debit     Credit

July 4   Supplies                                   $1,900

July 11   Cash                          $840

Fees Earned

Date     Account Titles            Debit     Credit

July 1    Accounts receivable            $72,960

c. If the unadjusted trial balance on July 31 shows a credit balance for Accounts Receivable, it means that an error has occurred, unless the cash received from customers on account exceeds the debit balance on the Accounts receivable.  This will mean that some customers paid in advance for services not yet rendered.  This credit balance needs to be transferred to the Deferred Revenue account.

Explanation:

a) Data and Calculations:

July 1 Accounts receivable, $72,960 Fees Earned $72,960

July 4 Supplies $1,900 Accounts payable $1,900

July 8 Cash $65,960 Accounts receivable $65,960

July 11 Accounts payable $840 Cash $840