Grete transferred $9,630 from her personal bank account to a bank account under the company name Grete Kanines — Rodewald formed dog grooming and training business called

Grete Rodewald formed a dog grooming and training business called Grete Kanines on September 1, 2017. After consulting with a friend who had taken introductory accounting, Grete created a chart of accounts for the business as follows: No. 101 Cash; No. 112 Accounts Receivable; No. 130 Prepaid Insurance; No. 151 Equipment; No. 201 Accounts Payable; No. 209 Unearned Revenue; No. 301 G. Rodewald, Capital; No. 306 G. Rodewald, Drawings; No. 400 Service Revenue; No. 610 Advertising Expense; No. 726 Rent Expense; and No. 737 Utilities Expense. During September, the following events and transactions occurred:

Sept. 1

Grete transferred $9,630 from her personal bank account to a bank account under the company name Grete Kanines.

2 Signed a one-year rental agreement for $690 per month. Paid the first month’s rent.

2 Paid $750 for a one-year insurance policy effective September 1, 2017.

5 Purchased $2,640 of equipment on credit.

7 Paid $420 for advertising in several community newsletters in September.

13 Collected $500 cash for providing dog grooming services.

21 Attended a dog show and provided $800 of dog grooming services for one of the major kennel owners. The kennel owner will pay the amount owing within two weeks.

24 Collected $540 from the kennel owner for the services provided on September 21. The kennel owner promised to pay the rest on October 2.

28 Paid $210 for utilities for the month of September.

29 Paid $1,470 of the amount owed from the September 5 equipment purchase.

30 Received $860 cash for dog training lessons that will start on October 10.

30 Collected $1,045 cash for providing dog grooming services.

30 Paid the owner, Grete Rodewald, $1,490 for her personal use.

Instructions

(a) Journalize the transactions.

(b) Post the journal entries directly to the ledger accounts. (Note: See Illustration 2.6).

TAKING IT FURTHER

Grete thinks she needs only one account for investments, drawings, revenues, and expenses because these are all owner’s equity accounts. Explain to her why she needs separate accounts.

SOLUTION

(a)	GENERAL JOURNAL	GENERAL JOURNAL	GENERAL JOURNAL
Date	Account Titles	Ref.	Debit	Credit
Sept. 1	Cash		101	9,630
G. Rodewald, Capital		301		9,630
2	Rent Expense		726	690
Cash		101		690
2	Prepaid Insurance		130	750
Cash		101		750
5	Equipment		151	2,640
Accounts Payable		201		2,640
7	Advertising Expense		610	420
Cash		101		420
13	Cash		101	500
Service Revenue		400		500
21	Accounts Receivable		112	800
Service Revenue		400		800
24	Cash		101	540
Accounts Receivable		112		540
28 Utilities Expense 737 210 Cash		101		210
29	Accounts Payable		201	1,470
Cash		101		1,470

Date	Account Titles	Ref.	Debit	Credit
Sept. 30	Cash		101	860
Unearned Revenue		209		860
30	Cash		101	1,045
Service Revenue		400		1,045
30	G. Rodewald, Drawings		306	1,490
Cash		101		1,490

(b)

Cash	Cash	Cash	Cash	Cash	No. 101
Date	Explanation	Ref.	Debit	Credit	Balance
Sept.	1	J1	9,630		9,630
	2	J1		690	8,940
	2	J1		750	8,190
	7	J1		420	7,770
	13	J1	500		8,270
	24	J1	540		8,810
	28	J1		210	8,600
	29	J1		1,470	7,130
	30	J1	860		7,990
	30	J1	1,045		9,035
	30	J1		1,490	7,545

Accounts Receivable	Accounts Receivable	Accounts Receivable	Accounts Receivable	Accounts Receivable	No. 112
Date	Explanation	Ref.	Debit	Credit	Balance
Sept.	21	J1	800		800
	24	J1		540	260

Prepaid Insurance	Prepaid Insurance	Prepaid Insurance	Prepaid Insurance	Prepaid Insurance	No. 130
Date	Explanation	Ref.	Debit	Credit	Balance
Sept.	2	J1	750		750

🔒

Unlock the complete assignment

You are viewing the free preview. Purchase this assignment once to reveal the complete resource.

$9.99 USD

Secure checkout is completed by Stripe.

Equipment	Equipment	Equipment	Equipment	Equipment	No. 151
Date	Explanation	Ref.	Debit	Credit	Balance
Sept.	5	J1	2,640		2,640

Accounts Payable	Accounts Payable	Accounts Payable	Accounts Payable	Accounts Payable	No. 201
Date	Explanation	Ref.	Debit	Credit	Balance
Sept.	5	J1		2,640	2,640
	29	J1	1,470		1,170

Unearned Revenue	Unearned Revenue	Unearned Revenue	Unearned Revenue	Unearned Revenue	No. 209
Date	Explanation	Ref.	Debit	Credit	Balance
Sept.	30	J1		860	860

G. Rodewald, Capital	G. Rodewald, Capital	G. Rodewald, Capital	G. Rodewald, Capital	G. Rodewald, Capital	No. 301
Date	Explanation	Ref.	Debit	Credit	Balance
Sept.	1	J1		9,630	9,630

G. Rodewald, Drawings	G. Rodewald, Drawings	G. Rodewald, Drawings	G. Rodewald, Drawings	G. Rodewald, Drawings	No. 306
Date	Explanation	Ref.	Debit	Credit	Balance
Sept.	30	J1	1,490		1,490

Service Revenue	Service Revenue	Service Revenue	Service Revenue	Service Revenue	No. 400
Date	Explanation	Ref.	Debit	Credit	Balance
Sept.	13	J1		500	500
	21	J1		800	1,300
	30	J1		1,045	2,345

Advertising Expense	Advertising Expense	Advertising Expense	Advertising Expense	Advertising Expense	No. 610
Date	Explanation	Ref.	Debit	Credit	Balance
Sept.	7	J1	420		420

Rent Expense	Rent Expense	Rent Expense	Rent Expense	Rent Expense	No. 726
Date	Explanation	Ref.	Debit	Credit	Balance
Sept.	2	J1	690		690

Utilities Expense	Utilities Expense	Utilities Expense	Utilities Expense	Utilities Expense	No. 737
Date	Explanation	Ref.	Debit	Credit	Balance
Sept.	28	J1	210		210
(c)

GRETE KANINES

Trial Balance

September 30, 2017

Debit Credit

Cash $7,545

Accounts receivable 260

Prepaid insurance 750

Equipment 2,640

Accounts payable $1,170

Unearned revenue 860

G. Rodewald, capital 9,630

G. Rodewald, drawings 1,490

Service revenue 2,345

Advertising expense 420

Rent expense 690

Utilities expense 210 ______

$14,005 $14,005

Taking It Further

While Grete is correct in making the connection those transactions involving investments, drawings, revenues, and expenses ultimately have an impact on the owner’s capital account, there remains a need for these separate accounts. Without them, a business is unable to report the revenues and expenses on the income statement, and the investments and drawings by the owner on the statement of owner’s equity. This detailed information is relevant and necessary to the users of the financial statements.