Chapter 3: Processing Accounting Information

Chapter 3:ProcessingAccounting Information

The following activities were during the first month of operation of Cordova Repair Company: The owners of Cordova Repair Company contributed $20,000 cash in exchange for stock ownership in the company. Cordova purchased equipment which cost $20,000. Cordova paid $8,000 cash and financed the balance at the bank. Cordova completed repair services on a fleet of automobiles for Collierville Corporation, and billed Collierville $8,000 for the services. Cordova paid rent expense of $5,000 for the month. Cordova collected $4,000 from Collierville Co. Cordova distributed a $500 dividend to its shareholders. Class Problem - Transactions

Cash + A/R + Equip. = N/P + CS + RE 1. = 2. = 3. = 4. = 5. = 6. _____ _____ _____= _____ _____ _____ Class Problem -Spreadsheet 20,000 20,000 ( 8,000) 20,000 12,000 8,000 8,000 Rev. (5,000) (5,000) Exp. 4,000 (4,000) (500) (500)Div. Tot. 10,500 + 4,000 + 20,000 = 12,000 + 20,000 + 2,500

To initially record transactions, we use a journal entry to represent the debits and credits. For example, in the Chapter 3 Class Problem, Item 1: Debit Credit Cash 20,000 Common Stock 20,000 Note that the debit is to the left and the credit is to the right. First we list the account (left hand entry on top), then the amount. The Format of a Journal Entry

2: Purchased equip. costing $20,000. Equip. 20,000 Cash 8,000 Notes Pay. 12,000 3: Billed customer $8,000. A/R 8,000 Service Revenue 8,000 Now back to the Class Problem and prepare the other journal entries:

4: Paid $5,000 cash for expenses. Expenses 5,000 Cash 5,000 5: Collected $4,000 from customer. Cash 4,000 A/R 4,000 Now back to the Class Problem, and prepare the other journal entries:

6: Paid $500 cash dividend to owners. Dividends 500 Cash 500 Note that dividends is a contra equity and reduces retained earnings. Now back to the Class Problem, and prepare the other journal entries:

Back to Class Problem: Posting to G/LNow post transactions (for Cash) to “T” account: Cash 20,000 8,000 4,000 5,000 500 Bal. 10,500

Analyze total effect (items 1-5): Assets = Liabilities + SE 1. = 2. = 3. = 4. = 5. = Exercise 3-3 NE NE I & D = NE I I NE I NE I D D NE I & D = NE NE NE

Journalize, THEN post to T-accounts (text requirement skips journals - we will not). 1. Received $6,500 x 3 = $19,500 Cash 19,500 Common Stock 19,500 2. Office Supplies 130 Cash 130 3. Van 15,000 A/P 15,000 Exercise 3-10

4. Cash 125 Delivery Service Rev. 125 5. A/R 200 Delivery Service Rev. 200 6. A/P 15,000 Cash 15,000 7. Cash 200 A/R 200 (Now post to T-accounts.) Exercise 3-10

Exercise 3-10 Cash A/R Office Supp. 200 19,500 130 130 200 125 15,000 200 4,695 0 130 Common Stock Delivery Service Rev. Van A/P 15,000 15,000 19,500 15,000 125 200 15,000 19,500 0 325

Now prepare the trial balance: DR CR Cash 4,695 Office Supplies 130 Van 15,000 Common Stock 19,500 Delivery Service Rev. 325 Totals 19,825 19,825 Exercise 3-11

a. Cash 150,000 Capital Stock 150,000 b. Rent Expense 400 Cash 400 c.Cash 100,000 Notes Payable 100,000 Problem 3-9A

d. Software (Equipment) 950 Cash 950 e. A/R 12,500 Consulting Revenue 12,500 f. Salary Expense 3,000 Cash 3,000 g. Utilities Expense 100 A/P 100 Problem 3-9A

10/1 Cash 66,000 CS 66,000 10/2 Land 15,000 Bldg. 75,000 Cash 9,000 N/Pay 81,000 10/3 Furniture 25,000 Cash 5,000 Acct. Pay 20,000 10/9 Equipment 3,500 Cash 3,500 10/12 Supplies 2,500 Acct. Pay 2,500 P3-7A

10/13 Cash 1,150 Ticket Revenue 400 Concession Revenue 750 10/17 Acct. Receivable 750 Rent Revenue 750 10/23 Cash 375 Acct. Receivable 375 10/24 Cash 1,700 Ticket Revenue 500 Concession Revenue 1,200 10/26 Dividends 750 Cash 750 P3-7A

10/27 Utilities Expense 1,275 Cash 1,275 10/30 Wage & Sal Exp. 2,250 Cash 2,250 10/31 Cash 2,000 Ticket Revenue 700 Concession Rev. 1,300 Add: at 10/31, Rapid City calculated that it had used $2,100 of the concession supplies that were purchased on 10/12. AJE? 10/31 Supplies Expense 2,100 Supplies 2,100 P3-7A

Chapter 3: Processing Accounting Information