Chapter 2

Illustrative Problem – Page 77 – 81

J.F.Outz , M.D. , has been practicing as a cardiologist for three
years . During April 2011, Outz completed the following
transaction in her practice of cardiology:
April 1. Paid office rent for April, $800.
April 3. Purchased equipment on account, $2.100.
April 5. Received cash on account from patients, $3.150.
April 8. Purchased X-ray film and other supplies on account,
$245.
April 9. One of the items of the equipment purchased on April 3
was defective. It was returned with the permission of the
supplies, who agreed to reduce the account for the amount
charged for the item, $325.
April 12. Paid cash to creditor on account , $1.250.
April 17. Paid cash renewal of a six- month property insurance
policy, $370.
April 20. Discovered that the balances of the cash account and the
accounts payable account as of April 1 were overstated by
$200. A payment of that amount to a creditor in March and
not been recorded Journalize the $200 payment as of April 20
.
April 24. Paid cash for laboratory analysis , $545.
April 27. Paid cash for business bank account for personal and
family expenses, $1.250.
April 30. Recorded the cash received in payment of service (on a
cash basis) to patients during April, $1.720.
April 30. Paid salaries of receptionist and nurses, $1.725.
April 30. Paid various utility expenses, $360.
April 30. Recorded fees charges to patients on account for
services performed in April, $5.145.
April 30. Paid miscellaneous expenses, $132.

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Outz’s account titles, numbers, and balances as of April 1 (all

normal balances) are listed as following:
Cash, 11, $4.123 ; Account Receivable, 12, $6.725 ; Supplies,
13, $290
Prepaid Insurance, 14, $465 ; Equipment, 18, $19.745
Account Payable, 22, $765 ; J.F Outs Drawing, 32, $0
Professional fees, 41, $0 ; Salary Expenses, 51, $0 ;Rent
Expenses, 53, $0
Laboratory Expenses, 55, $0 ; Utilities Expenses, 56, $0
Miscellaneous Expenses, 59, $0
Instructions:
1. Open a ledger of standard four-column accounts for Dr. Outz
as of April 1. Enter the balances in the appropriate balance
columns and place a check mark ( ) in the posting Reference
column.
(Hint: Verify the equality of the debit and credit balances in the
ledger before proceeding with the next instruction).
2. Journalize each transaction in a two-column journal.
3. Post the journal to the ledger, extending the month-end
balances to the appropriate balance columns after each posting.
4. prepare an unadjusted trial balance as of April 30.

Solution:
Journal

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Date Description Post. Ref. Debit Credit

Rent Expense 800
Apr. 1
Cash 800
Equipment 2.100
Apr.3
Account payable 2.100
Cash 3.150
Apr.5
Account receivable 3.150
Supplies 245
Apr.8
Account payable 245
Account payable 325
Apr.9
Equipment 325
Account payable 1.250
Apr. 12
Cash 1.250
Prepaid Insurance 370
Apr. 17
Cash 370
Account payable 200
Apr. 20
Cash 200
Laboratory expenses 545
Apr. 24
Cash 545
J.F.Outz, Drawing 1.250
Apr. 27
Cash 1.250
Cash 1.720
Apr. 30
Professional fees 1.720
Salary expenses 1.725
Apr. 30 Cash 1.725
Utilities expenses 360
Apr. 30 Cash 360
Account Receivable 5.145
Apr. 30
Professional fees 5.145
Miscellaneous expenses 132
Apr. 30 Cash 132

T Accounts

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cash J.f.Outz, Capital

4.123Bal.Arl.1 800 30.583
3.150 1.250 30.583 Bal.
1.720 370
200 Professional fees
545 1.720
1,250 5.145
1,725
360 6.865 Bal.
132

8.993 6.632
Bal. 2,361

Supplies Account payable

290Bal.Apr.1 325 765 Bal. Apr.1
245 1.250 2.100
Bal. 535 200 245
1.775 3.100
1.335 Bal.

Equipment Salary expenses

1.725
19.745 Bal.Apr.1 325
2.100
21.845 325 Bal. 1.725
Bal. 21,520

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Miscellaneous expenses Rent expenses

132 800

Bal. 132 Bal. 800

Laboratory expenses Prepaid Insurance

545 465Bal.Apr.1
370
Bal. 545
Bal. 835

J.F.Outz, Drawing Utilities expenses

1.250 360

Bal. 1.250 Bal. 360

Account receivables
6.725Bal.Apr.1 3.150
5,145
3.150
11.870
Bal. 8.720

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J.F.Outz, M.D
Unadjusted trial balance
April 30, 2011
Debit balances Credit balances
Cash 2.361
Account receivable 8.720
Supplies 535
Prepaid Insurance 835
Equipment 21.520
Account payable 1.335
J.F.Outz, Capital 30.583
J.F.Outz, Drawing 1.250
Professional fees 6.865
Salary expenses 1.725
Rent expenses 800
Laboratory expenses 545
Utilities expenses 360
Miscellaneous expenses 132

38.783 38.783

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Pr 2-2 A – page 91

On October 1, 2010, Cody Doerr established Banyan Realty, which

completed the following transaction during the month:

A. Cody Doerr transferred cash from a personal bank account to an

account to be used for the business, $17.500.
B. purchased supplies on account, $1.000.
C. Earned sales commission, receiving cash, $12.250.
D. Paid rent on office and equipment for the month, $3.800.
E. Paid creditor on account, $600.
F. withdrew cash for personal use, $3.000.
G. Paid automobile expenses (including rental charge) for month,
$1.500, and miscellaneous expenses, $400.
H. Paid office salaries, $3.100.
I. Determined that the cost of supplies used was, $725.

Instructions:
1. Journalize entries for transactions (A) through (I), using the
following account titles:
Cash; Supplies; Accounts payable; Cody Doerr, Capital; Cody Doerr,
Drawings; Sales commissions; Rent expenses; Office salaries expenses;
Automobile expenses; Supplies expenses; Miscellaneous expenses.
Journal entry explanation may be omitted.
2. Prepare T accounts, using the account titles in (1). Post the journal
entries to these accounts, placing the appropriate letter to the left of
each amount to identify the transaction. Determine the account
balance, after all posting is complete. Accounts containing only a single
entry do not need balance.
3. Prepare an unadjusted trial balance as of October 31, 2010.
4. Determine the following:
a. Amount of total revenue recorded in the ledger.
b. Amount of total expenses recorded in the ledger.
c. Amount of total net income recorded in the ledger.

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Solution:
1. Journal

Date Description Post. Ref. Debit Credit

Cash 17,500
A Cody Doerr, Capital 17,500
Supplies 1,000
B
Account payable 1,000
Cash 12,250
C
Sales Commissions 12,250
Rent Expense 3,800
D
Cash 3,800
Account payable 600
E
Cash 600
Cody Doerr, Drawing 3,000
F Cash 3,000
Automobile Expense 1,500
G Miscellaneous Expense 400
Cash 1,900
Office Salaries Expense 3,100
H
Cash 3,100
Supplies Expense 725
I
Supplies 725

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2. T Accounts

cash Cody Doerr, Capital

17.500 3.800 17.500
12.250 600 17.500 Bal.
3.000
1.900 Sales Commissions
3.100 12.250

Bal. 17.350 12.250 Bal.

Supplies Account payable

1.000 725 600 1.000

Bal. 275

400 Bal.

Rent expenses Office salary expenses

3.100
3.800

Bal. 3.100
Bal. 3.800

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Miscellaneous expenses Cody Doerr ,Drawing

400 3.000

Bal. 400 Bal. 3.000

Automobile expenses Supplies expenses

1.500 725

Bal. 1.500
Bal. 725

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3. Unadjusted trial
balance

Banyan Realty
Unadjusted trial balance
October 31, 2010
Debit balances Credit balances
Cash 17.350
Supplies 275
Account payable 400
Cody Doerr, Capital 17.500
Cody Doerr, Drawing 3.000
Sales commission 12.250
Rent expenses 3.800
Office salaries expenses 3.100
Automobile expenses 1.500
Supplies expenses 725
Miscellaneous expenses 400

30.150 30.150

4.

A. $12.250
B. $9.525 ($3.800+$3.100+$1.500+$725+$400)
C. $2.725 ($12.250-$9.525)

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Pr 2-2 B – page 95
On August 1, 2010, Cheryl Newsome established Titus Realty, which
completed the following transactions during this month:
A. Cheryl Newsome transferred cash form a personal bank account to
an account to be used for the business, $25.000.
B. Paid rent on office and equipment for the month, $2.750.
C. Purchased supplies on account, $950.
D. Paid creditor on account, $400.
E. Earned sales commission, receiving cash, $18.100.
F. Paid automobile expenses (including rental charge) for month,
$1.000, and miscellaneous expenses, $600.
G. Paid office salaries, $2.150.
H. Determined that the cost of supplies used was, $575
I. Withdrew cash for personal use, $2.000.
Instructions:
1. Journalize entries for transactions (A) through (I), using the
following account titles:
Cash; Supplies; Accounts payable; Cheryl Newsome, Capital; Cheryl
Newsome, Drawings; Sales commissions; Rent expenses; Office salaries
expenses; Automobile expenses; Supplies expenses; Miscellaneous
expenses.
Explanation may be omitted.
2. Prepare T accounts, using the account titles in (1). Post the journal
entries to these accounts, placing the appropriate letter to the left of
each amount to identify the transaction. Determine the account
balance, after all posting is complete. Accounts containing only a single
entry do not need balance.
3. Prepare an unadjusted trial balance as of August 31, 2010.
4. Determine the following:
a. Amount of total revenue recorded in the ledger.
b. Amount of total expenses recorded in the ledger.
c. Amount of total net income for August.

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Solution:
1. Journal

Date Description Post. Ref. Debit Credit

Cash 25.000
A Cheryl Newsome , Capital 25.000
Rent Expense 2.750
B
Cash 2.750
Supplies 950
C
Account payable 950
Account payable 400
D
Cash 400
Cash 18.100
E
Sales commissions 18.100
Automobile Expense 1.000
F Miscellaneous Expense 600
Cash 1.600
Office Salaries Expense 2.150
G Cash 2.150
Supplies Expense 575
H
Supplies 575
Cheryl Newsome, Drawing 2.000
I
Cash 2.000

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2. T Accounts

cash Cheryl Newsome, Capital

25.000 2.750 25.000
18.100 400 25.000 Bal.
1.600
2.150 Sales Commissions
2.000 18.100

Bal. 34.200 18.100 Bal.

Supplies Account payable

950 575 400 950

Bal. 375

550 Bal.

Rent expenses Office salary expenses

2.150
2.750

Bal. 2.150
Bal. 2.750

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Miscellaneous expenses Cheryl Newsome, Drawing

600 2.000

Bal. 600 Bal. 2.000

Automobile expenses Supplies expenses

1.000 525

Bal. 1.000
Bal. 525

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3. Unadjusted trial
balance

Titus Realty
Unadjusted trial balance
August 31, 2010
Debit balances Credit balances
Cash 34.200
Supplies 375
Account payable 550
Cherly Newsome, Capital 25.000
Cherly Newsome, Drawing 2.000
Sales commission 18.100
Rent expenses 2.750
Office salaries expenses 2.150
Automobile expenses 1.000
Supplies expenses 575
Miscellaneous expenses 600

43.650 43.650

4.

A. $18.100
B. $7.075 ($2.150+$2.750+$1.000+$575+$600)
C. $11.025 ($18.100-$7.075)

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