Q16E - Horngren'S Financial And Managerial Accounting

Question

The following transactions occurred for Lawrence Engineering: 

Jul. 2 Received \(14,000 contribution from Brett Lawrence in exchange for common stock. 

4 Paid utilities expense of \)370. 

5 Purchased equipment on account, \(1,600. 

10 Performed services for a client on account, \)2,900. 

12 Borrowed \(7,100 cash, signing a notes payable. 

19 Cash dividends of \)200 were paid to stockholders. 

21 Purchased office supplies for $840 and paid cash. 

27 Paid the liability from July 5.

Analyzing and journalizing transactions 

Journalize the transactions of Lawrence Engineering. Include an explanation with each journal entry. Use the following accounts: Cash; Accounts Receivable; Office Supplies; Equipment; Accounts Payable; Notes Payable; Common Stock; Dividends; Service Revenue; and Utilities Expense.

Step-by-Step Solution

Answer

The total of Debit and Credit is $28,610.

Step 1: Definition of Liability

The liabilities are defined as the amount owed by the business to some other parties or persons. Examples are creditors, outstanding salaries etc.

Step 2: Journal Entries

Date	Particulars	Debit ($)	Credit ($)
July
2	Cash	14,000
	Common Stock		14,000
	(Common stock issued using cash)
4	Utilities expense	370
	Cash		370
	(Utilities expense paid in cash)
5	Equipment	1,600
	Accounts payable		1,600
	(Equipment purchased on credit)
10	Accounts Receivables	2,900
	Service Revenue		2,900
	(Provided services to clients on credit)
12	Cash	7,100
	Notes Payable		7,100
	(Cash received in exchange of notes payable)
19	Dividends	200
	Cash		200
	(Cash dividends paid)
21	Office Supplies	840
	Cash		840
	(Office supplies purchased in cash)
27	Accounts Payable	1,600
	Cash		1,600
	(Liability paid in cash)
		28,610	28,610