On January 1, 2018, the general ledger of Grand Finale Fireworks includes the fo
ID: 2482588 • Letter: O
Question
On January 1, 2018, the general ledger of Grand Finale Fireworks includes the following account balances:
Accounts Debit Credit
Cash $ 43,200
Accounts Receivable 45,500
Supplies 8,000
Equipment 69,000
Accumulated Depreciation $ 9,500
Accounts Payable 15,100
Common Stock, $1 par value 15,000
Additional Paid-in Capital 85,000
Retained Earnings 41,100
Totals $ 165,700 $ 165,700
During January 2018, the following transactions occur:
January 2 Issue an additional 2,000 shares of $1 par value common stock for $40,000.
January 9 Provide services to customers on account, $15,600.
January 10 Purchase additional supplies on account, $5,400.
January 12 Repurchase 1,200 shares of treasury stock for $17 per share.
January 15 Pay cash on accounts payable, $17,000.
January 21 Provide services to customers for cash, $49,600.
January 22 Receive cash on accounts receivable, $17,100.
January 29 Declare a cash dividend of $0.30 per share to all shares outstanding on January 29. The dividend is payable on February 15. (Hint: Grand Finale Fireworks had 15,000 shares outstanding on January 1, 2018 and dividends are not paid on treasury stock.)
January 30 Reissue 800 shares of treasury stock for $19 per share.
January 31 Pay cash for salaries during January, $42,500.
Explanation / Answer
Prepare the Journal Entry for additional issue of 2000 shares of treasury stock
General Voucher
Date
Account title and Explanation
Post.
Ref.
Debit ($)
Credit ($)
January 2, 2018
Cash(2000 x $20)
40,000
Treasury stock (2000 x $20)
40,000
( To issue of treasury stock of 2000 shares debited to cash account )
Explanation: The issue of 2000 shares of treasury stock debited to cash credited to treasury stock account
Prepare the Journal Entry for services to customers on account, $15,600.
General Voucher
Date
Account title and Explanation
Post.
Ref.
Debit ($)
Credit ($)
January 9, 2018
Account receivable
15,600
Service revenue
15,600
( To services rendered on account debited to account receivable account )
Explanation: The services rendered on account for $15,600 debited to account receivable and credited to service revenue account
Prepare the Journal Entry for Purchase additional supplies on account, $5,400.
General Voucher
Date
Account title and Explanation
Post.
Ref.
Debit ($)
Credit ($)
January 10, 2018
Purchase
5,400
Account payable
5,400
( To purchase of supplies on account debited to purchase account )
Explanation: The purchases on account for $5400 debited to purchase account and credited to account payable account
Prepare the Journal Entry for Repurchase 1,200 shares of treasury stock for $17 per share.
General Voucher
Date
Account title and Explanation
Post.
Ref.
Debit ($)
Credit ($)
January 12, 2018
Treasury stock(1200 x $20)
24,000
Additional Paid in capital (1200 x $3)
3,600
Cash
20,400
( To re -purchase of treasury stock of 1200 shares debited to treasury stock account )
Explanation: The re -purchase of 1200 shares of treasury stock debited to treasury stock and credited to cash account
Prepare the Journal Entry for Pay cash on accounts payable, $17,000.
General Voucher
Date
Account title and Explanation
Post.
Ref.
Debit ($)
Credit ($)
January 15, 2018
Account payable
17,000
Cash
17,000
( To cash paid to suppliers debited accounts payable account )
Explanation: The cash paid to suppliers debited to accounts payable account and credited to cash account
Prepare the Journal Entry for Provide services to customers for cash, $49,600.
General Voucher
Date
Account title and Explanation
Post.
Ref.
Debit ($)
Credit ($)
January 21, 2018
Cash
49,600
Service revenue
49,600
( To services rendered on cash debited to cash account )
Explanation: The services rendered on cash for $49,600 debited to cash and credited to service revenue account
Prepare the Journal Entry for Receive cash on accounts receivable, $17,100.
General Voucher
Date
Account title and Explanation
Post.
Ref.
Debit ($)
Credit ($)
January22, 2018
Cash
17,100
Account receivable
17,100
( To cash received on account receivable account )
Explanation: The cash received for $17100 debited to cash and credited to account receivable account
Prepare the Journal Entry for Declare a cash dividend of $0.30 per share to all shares outstanding on January 29. The dividend is payable on February 15
General Voucher
Date
Account title and Explanation
Post.
Ref.
Debit ($)
Credit ($)
January29, 2018
Dividends, Common Stock (15000 x 0.3)
4,500
Dividend payable
4,500
( To dividend declared on 15000 outstanding shares ay $0.30 per share debited to dividend common stock account )
General Voucher
Date
Account title and Explanation
Post.
Ref.
Debit ($)
Credit ($)
January 2, 2018
Cash(2000 x $20)
40,000
Treasury stock (2000 x $20)
40,000
( To issue of treasury stock of 2000 shares debited to cash account )