Q 31PGA-2 - 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 

2. Open the following four-column accounts including account numbers: Cash, 101; Accounts Receivable, 111; Office Supplies, 121; Prepaid Insurance, 131; Land, 141; Building, 151; Furniture, 161; Accounts Payable, 201; Utilities Payable, 211; Notes Payable, 221; Common Stock, 301; Dividends, 311; Service Revenue, 411; Salaries Expense, 511; Rent Expense, 521; and Utilities Expense, 531.

Step-by-Step Solution

Answer

The notes payable is money owed to financers and the required four-column accounts are prepared in step 2.

Step-by-Step Solution Step 1: Definition of Notes Payable

The notes payables are defined as the long-term liability which shows the money owed by the company to its financers.

Step 2: Opening Four-Column Accounts

Cash                                                                                                                                 Account Number – 101
					Balance
Date	Item	PR	Debit	Credit	Debit	Credit

Accounts Receivables                                                                                                  Account Number - 111
					Balance
Date	Item	PR	Debit	Credit	Debit	Credit

Office Supplies                                                                                                             Account Number - 121
					Balance
Date	Item	PR	Debit	Credit	Debit	Credit

Prepaid Insurance                                                                                                         Account Number - 131
					Balance
Date	Item	PR	Debit	Credit	Debit	Credit

Land                                                                                                                        Account Number - 141
					Balance
Date	Item	PR	Debit	Credit	Debit	Credit

Building                                                                                                                   Account Number - 151
					Balance
Date	Item	PR	Debit	Credit	Debit	Credit

Furniture                                                                                                                  Account Number - 161
					Balance
Date	Item	PR	Debit	Credit	Debit	Credit

Accounts Payable                                                                                                                      Account Number - 201
					Balance
Date	Item	PR	Debit	Credit	Debit	Credit

Utilities Payable                                                                                                          Account Number - 211
					Balance
Date	Item	PR	Debit	Credit	Debit	Credit

Notes Payable                                                                                                                      Account Number - 221
					Balance
Date	Item	PR	Debit	Credit	Debit	Credit

Common Stock                                                                                                               Account Number – 301
					Balance
Date	Item	PR	Debit	Credit	Debit	Credit

Dividends                                                                                                                        Account Number - 311
					Balance
Date	Item	PR	Debit	Credit	Debit	Credit

Service Revenue                                                                                                            Account Number - 411
					Balance
Date	Item	PR	Debit	Credit	Debit	Credit

Salaries Expense                                                                                                            Account Number - 511
					Balance
Date	Item	PR	Debit	Credit	Debit	Credit

Rent Expense                                                                                                                  Account Number - 521
					Balance
Date	Item	PR	Debit	Credit	Debit	Credit

Utilities Expense Account Number -531
					Balance
Date	Item	PR	Debit	Credit	Debit	Credit