Q 31PGA-1 - Horngren'S Financial And Managerial Accounting

Question

Journalizing transactions, posting journal entries to four-column accounts, and preparing a trial balance 

Terrence Murphy opened a law office on January 1, 2018. During the first month of operations, the business completed the following transactions: 

Jan. 1 Murphy contributed \(78,000 cash to the business, Terrence Murphy, Attorney. The business issued common stock to Murphy. 

3 Purchased office supplies, \)600, and furniture, \(1,700, on account. 

4 Performed legal services for a client and received \)1,000 cash. 

7 Purchased a building with a market value of \(130,000, and land with a market value of \)25,000. The business paid \(25,000 cash and signed a note payable to the bank for the remaining amount. 

11 Prepared legal documents for a client on account, \)400. 

15 Paid assistant’s semimonthly salary, \(1,120. 

16 Paid for the office supplies purchased on January 3 on account. 

18 Received \)2,700 cash for helping a client sell real estate. 

19 Defended a client in court and billed the client for \(1,800. 

25 Received a bill for utilities, \)600. The bill will be paid next month. 

29 Received cash on account, \(1,500. 

30 Paid \)1,200 cash for a 12-month insurance policy starting on February 1. 

30 Paid assistant’s semimonthly salary, \(1,120. 

31 Paid monthly rent expense, \)1,800. 

31 Paid cash dividends of $2,200.

Requirements 

1. Record each transaction in the journal, using the following account titles: Cash; Accounts Receivable; Office Supplies; Prepaid Insurance; Land; Building; Furniture; Accounts Payable; Utilities Payable; Notes Payable; Common Stock; Dividends; Service Revenue; Salaries Expense; Rent Expense; and Utilities Expense. Explanations are not required.

Step-by-Step Solution

Answer

Service Revenue is the revenue earned for providing services to the clients and required journal entries are passed in step 2.

Step-by-Step Solution Step 1: Definition of Service Revenue

The service revenue is defined as the amount of money received by the business in exchange for providing services

Step 2: Recording Journal Entries

	Journal entry
Date	Particulars	Debit ($)	Credit ($)
Jan
1	Cash	$78,000
	Common Stock		$78,000
3	Office Supplies	$600
	Furniture	$1,700
	Accounts Payable		$2,300
4	Cash	$1,000
	Service Revenue		$1,000
7	Building	$130,000
	Land	$25,000
	Cash		$25,000
	Notes Payable		$130,000
11	Accounts Receivables	$400
	Service Revenue		$400
15	Salaries Expense	$1,120
	Cash		$1,120
16	Accounts Payable	$600
	Cash		$600
18	Cash	$2,700
	Service Revenue		$2,700
19	Accounts Receivables	$1,800
	Service Revenue		$1,800
25	Utilities Expense	$600
	Utilities Payable		$600
29	Cash	$1,500
	Accounts Receivables		$1,500
30	Prepaid Insurance	$1,200
	Cash		$1,200
30	Salary Expense	$1,120
	Cash		$1,120
31	Rent Expense	$1,800
	Cash		$1,800
31	Dividends	$2,200
	Cash		$2,200