Valley Realty
Unadjusted Trial Balance
July 31, 2014
Debit
Balances
Credit
Balances
11 Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52,500
12 Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,100
13 Prepaid Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,600
14 Office Supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,800
16 Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —
21 Accounts Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,000
22 Unearned Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —
23 Notes Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —
31 Cindy Getman, Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87,500
32 Cindy Getman, Drawing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44,800
41 Fees Earned . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 591,500
51 Salary and Commission Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 385,000
52 Rent Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49,000
53 Advertising Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32,200
54 Automobile Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,750
59 Miscellaneous Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,250
700,000 700,000
The following business transactions were completed by Valley Realty during August 2014:
Aug. 1. Purchased office supplies on account, $3,150.
2. Paid rent on office for month, $7,200.
3. Received cash from clients on account, $83,900.
Aug. 5. Paid insurance premiums, $12,000.
9. Returned a portion of the office supplies purchased on August 1, receiving full credit for their cost, $400.
17. Paid advertising expense, $8,000.
23. Paid creditors on account, $13,750.
Enter the following transactions on Page 19 of the two-column journal.
29. Paid miscellaneous expenses, $1,700.
30. Paid automobile expense (including rental charges for an automobile), $2,500.
31. Discovered an error in computing a commission during July; received cash from the salesperson for the overpayment, $2,000.
31. Paid salaries and commissions for the month, $53,000.
31. Recorded revenue earned and billed to clients during the month, $183,500.
31. Purchased land for a future building site for $75,000, paying $7,500 in cash and giving a note payable for the remainder.
31. Withdrew cash for personal use, $1,000.
31. Rented land purchased on August 31 to a local university for use as a parking lot during football season (September, October, and November); received advance payment of $5,000.
Instructions
1. Record the August 1 balance of each account in the appropriate balance column of a four-column account, write Balance in the item section, and place a check mark () in the Posting Reference column.
2. Journalize the transactions for August in a two-column journal beginning on Page 18.
Journal entry explanations may be omitted.
3. Post to the ledger, extending the account balance to the appropriate balance column after each posting.
4. Prepare an unadjusted trial balance of the ledger as of August 31, 2014.
5. Assume that the August 31 transaction for Cindy Getman’s cash withdrawal should have been $10,000. (a) Why did the unadjusted trial balance in (4) balance? (b) Journalize the correcting entry. (c) Is this error a transposition or slide?
Answer:
2. and 3.
JOURNAL Page 18
Date Description
Post.
Ref. Debit Credit
2014
Aug. 1 Office Supplies 14 3,150
Accounts Payable 21 3,150
2 Rent Expense 52 7,200
Cash 11 7,200
3 Cash 11 83,900
Accounts Receivable 12 83,900
5 Prepaid Insurance 13 12,000
Cash 11 12,000
9 Accounts Payable 21 400
Office Supplies 14 400
17 Advertising Expense 53 8,000
Cash 11 8,000
23 Accounts Payable 21 13,750
Cash 11 13,750
JOURNAL Page 19
Date Description
Post.
Ref. Debit Credit
2014
Aug. 29 Miscellaneous Expense 59 1,700
Cash 11 1,700
30 Automobile Expense 54 2,500
Cash 11 2,500
31 Cash 11 2,000
Salary and Commission Expense 51 2,000
31 Salary and Commission Expense 51 53,000
Cash 11 53,000
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
31 Accounts Receivable 12 183,500
Fees Earned 41 183,500
31 Land 16 75,000
Cash 11 7,500
Notes Payable 23 67,500
31 Cindy Getman, Drawing 32 1,000
Cash 11 1,000
31 Cash 11 5,000
Unearned Rent 22 5,000
1. and 3.
Account: Cash
GENERAL LEDGER
Account No. 11
Date Item
Post.
Ref. Debit Credit
Balance
Debit Credit
2014
Aug. 1 Balance √ 52,500
2 18 7,200 45,300
3 18 83,900 129,200
5 18 12,000 117,200
17 18 8,000 109,200
23 18 13,750 95,450
29 19 1,700 93,750
30 19 2,500 91,250
31 19 2,000 93,250
31 19 53,000 40,250
31 19 7,500 32,750
31 19 1,000 31,750
31 19 5,000 36,750
Account: Accounts Receivable Account No. 12
Date Item
Post.
Ref. Debit Credit
Balance
Debit Credit
2014
Aug. 1 Balance √ 100,100
3 18 83,900 16,200
31 19 183,500 199,700
Account: Prepaid Insurance
Account: Office Supplies
Account: Land
Account No. 13
Account No. 14
Account No. 16
Date Item
Post.
Ref. Debit Credit
Balance
Debit Credit
2014
Aug. 31 19 75,000 75,000
Account: Accounts Payable Account No. 21
Date Item
Post.
Ref. Debit Credit
Balance
Debit Credit
2014
Aug. 1 Balance √ 21,000
1 18 3,150 24,150
9 18 400 23,750
23 18 13,750 10,000
Account: Unearned Rent
Account: Notes Payable
Account No. 22
Account No. 23
Date Item
Post.
Ref. Debit Credit
Balance
Debit Credit
2014
Aug. 31 19 67,500 67,500
Account: Cindy Getman, Capital Account No. 31
Date Item
Post.
Ref. Debit Credit
Balance
Debit Credit
2014
Aug. 1 Balance √ 44,800
31 19 1,000 45,800
Date Item
Post.
Ref. Debit Credit
Balance
Debit Credit
2014
Aug. 1 Balance √ 87,500
Account: Cindy Getman, Drawing
Account: Fees Earned
Account No. 32
Account No. 41
Date Item
Post.
Ref. Debit Credit
Balance
Debit Credit
2014
Aug. 1 Balance √ 591,500
31 19 183,500 775,000
Account: Salary and Commission Expense Account No. 51
Date Item
Post.
Ref. Debit Credit
Balance
Debit Credit
2014
Aug. 1 Balance √ 385,000
31 19 2,000 383,000
31 19 53,000 436,000
Account: Rent Expense Account No. 52
Date Item
Post.
Ref. Debit Credit
Balance
Debit Credit
2014
Aug. 1 Balance √ 49,000
2 18 7,200 56,200
Account: Advertising Expense Account No. 53
Date Item
Post.
Ref. Debit Credit
Balance
Debit Credit
2014
Aug. 1 Balance √ 32,200
17 18 8,000 40,200
Account: Automobile Expense
Account: Miscellaneous Expense
Account No. 54
Account No. 59
Date Item
Post.
Ref. Debit Credit
Balance
Debit Credit
2014
Aug. 1 Balance √ 5,250
29 19 1,700 6,950
4.
VALLEY REALTY
Unadjusted Trial Balance
August 31, 2014
Debit
Balances
Credit
Balances
Cash 36,750
Accounts Receivable 199,700
Prepaid Insurance 24,600
Office Supplies 5,550
Land 75,000
Accounts Payable 10,000
Unearned Rent 5,000
Notes Payable 67,500
Cindy Getman, Capital 87,500
Cindy Getman, Drawing 45,800
Fees Earned 775,000
Salary and Commission Expense 436,000
Rent Expense 56,200
Advertising Expense 40,200
Automobile Expense 18,250
Miscellaneous Expense 6,950
945,000 945,000
5. (a) The unadjusted trial balance in (4) still balances, since the debits equaled
the credits in the original journal entry.
(b) The correcting entry for $9,000 ($10,000 – $1,000) would be as follows:
JOURNAL Page 19
Date Description
Post.
Ref. Debit Credit
2014
Aug. 31 Cindy Getman, Drawing 32 9,000
Cash 11 9,000
(c) Slide