Recognition of normal balances

  1. Recognition of normal balances
    The following items appeared in the accounting records of Triguero’s, a retail music store that also sponsors concerts. Classify each of the items as an asset, liability, revenue, or expense from the company’s viewpoint. Also indicate the normal account balance of each item.

a. The albums, tapes, and CDs held for sale to customers.
b. A long-term loan owed to Citizens Bank.
c. Promotional costs to publicize a concert.
d. Daily sales of merchandise sold,
e. Amounts due from customers,
f. Land held as an investment,
g. A new fax machine purchased for office use.
h. Amounts to be paid in 10 days to suppliers,
i. Amounts paid to a mall for rent.

  1. Basic journal entries
    The following April transactions pertain to the Jennifer Royall Company:

Apr. 1 Jenni¬fer Royall invested cash of $15,000 and land valued at $10,000 into the business.
Apr. 5 Provided $1,200 of services to Jason Ratchford, a client, on account.
Apr. 9 Paid $250 of salaries to an employee.
Apr. 14 Acquired a new computer for $3,200, on account.
Apr. 20 Collected $800 from Jason Ratchford for services provided on April 5.
Apr. 24 Borrowed $7,500 from BestBanc by securing a six-month loan.

Prepare journal entries (and explanations) to record the preceding transactions and events.

  1. Balance sheet preparation. The following data relate to Preston Company as of December 31, 20XX:

Building $44,000 Accounts receivable $24,000
Cash 17,000 Loan payable 30,000
J. Preston, Capital 65,000 Land 21,000
Accounts payable ?

Prepare a balance sheet as of December 31, 20XX. (See Exhibit 1.1 and 1.4)

  1. Journal entry preparation. On January 1 of the current year, Peter Houston invested $100,000 cash into his company MuniServ. The cash was obtained from an owner investment by Peter Houston of $70,000 and a $30,000 notes payable. Shortly thereafter, the company ac¬quired selected assets of a bankrupt competitor. The acquisition included land ($15,000), a building ($40,000), and vehicles ($10,000). MuniServ paid $45,000 at the time of the transaction and agreed to remit the remaining balance due of $20,000 (an account payable) by February 15.

During January, the company had additional cash outlays for the follow¬ing items:

Purchases of store equipment $4,600
Note payment 500
Salaries expense 2,300
Advertising expense 700

The January utility bill of $200 was received on January 31 and will be paid next month. MuniServ rendered services to clients on account amounting to $9,400. All customers have been billed; by month end, $3,700 had been received in settlement of account balances.

Instructions
a. Present journal entries that reflect MuniServ’s January transactions, including the $100,000 raised from the owner investment and loan (See exhibit 2.6).
b. Compute the total debits, total credits, and ending balance that would be found in the company’s Cash account (Post to “T” Accounts, see exhibit 2.3 and 2.4).
c. Prepare a trail balance as of January 31 (See exhibit 2.9).

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