University:
Michigan State University
Course:
ACC 300 | Intermediate Financial Accounting I
Academic year:

2021
Views:

218

Pages:

3
Author:

kundgetanufv

30 Minutes, Medium PROBLEM 3.2 A ENVIRONMENTAL SERVICES, INC. a. (1) (a) The asset Accounts Receivable was increased. Increases in assets are recorded by debits. Debit Accounts Receivable, $2,500. (b) Revenue has been earned. Revenue increases owners’ equity. Increases in owners’ equity are recorded by credits. Credit Testing Service Revenue, $2,500. (2) (a) The asset Testing Supplies was increased. Increases in assets are recorded by debits. Debit Testing Supplies, $3,800. (b) The asset Cash was decreased. Decreases in assets are recorded by credits. Credit Cash, $800. (c) The liability Accounts Payable was increased. Increases in liabilities are recorded by credits. Credit Accounts Payable, $3,000. (3) (a) The liability Accounts Payable was decreased. Decreases in liabilities are recorded by debits. Debit Accounts Payable, $100. (b) The asset Testing Supplies was decreased. Decreases in assets are recorded by credits. Credit Testing Supplies, $100. (4) (a) The asset Cash was increased. Increases in assets are recorded by debits. Debit Cash, $20,000. (b) The owners’ equity account Capital Stock was increased. Increases in owners’ equity are recorded by credits. Credit Capital Stock, $20,000. (5) (a) The asset Cash was increased. Increases in assets are recorded by debits. Debit Cash, $600. (b) The asset Accounts Receivable was decreased. Decreases in assets are recorded by credits. Credit Accounts Receivable, $600. (6) (a) The liability Accounts Payable was decreased. Decreases in liabilities are recorded by debits. Debit Accounts Payable, $2,900 ($3,800 - $800 - $100). (b) The asset Cash was decreased. Decreases in assets are recorded by credits. Credit Cash, $2,900. (7) (a) The Dividends account was increased. Dividends decrease the owners’ equity account Retained Earnings. Decreases in owners’ equity are recorded by debits. Debit Dividends, $6,800. (b) The asset Cash was decreased. Decreases in assets are recorded by credits. Credit Cash, $6,800. P3.2A PROBLEM 3.2A ENVIRONMENTAL SERVICES, INC. (continued) b. General Journal 20_ Aug. (1) 1 Accounts Receivable Testin g Service Revenue Billed customers for services rendered. 2,500 2,500 (2) 3 Testing Supplies Cash Accounts Pa y able Purchased testing supplies. 3,800 800 3,000 (3) Accounts Payable Testin g Su pp lies Returned portion of testing supplies purchased on Aug. 3. (4) 17 Cash Ca p ital Stock Issued 2,500 shares of capital stock at $8 per share. 5 100 100 20,000 20,000 (5) 22 Cash 600 Accounts Receivable Received partial payment for services billed on Aug. 1. (6) 29 Accounts Payable Cash Paid outstanding balance owed for testing supplies purchased on Aug. 3. (7) 30 Dividends Cash Declared and paid a cash dividend. 600 2,900 2,900 6,800 6,800 P3.2A (p.2) PROBLEM 3.2 A ENVIRONMENTAL SERVICES, INC. (concluded) c. The realization principle requires that revenue be recorded when it is earned , even if cash for the goods or services provided has not been received. d. The matching principle requires that expenses incurred in an accounting period be matched with revenue earned in the same period. Testing supplies are recorded as an asset when they are first purchased. As these supplies are used in a particular accounting period, their cost will be matched against the revenue earned in that period. P3.2A (p.3)