prime time realty acts as an agent in buying selling renting and managing real estat 551216

PR 2-4B Journal entries and trial balance

Prime Time Realty acts as an agent in buying, selling, renting, and managing real estate. The unadjusted trial balance on July 31, 2012, is shown below.

The following business transactions were completed by Prime Time Realty during August 2012:

Aug. 1. Purchased office supplies on account, $1,800.

2. Paid rent on office for month, $5,000.

3. Received cash from clients on account, $40,000.

5. Paid annual insurance premiums, $6,000.

9. Returned a portion of the office supplies purchased on August 1, receivingfull credit for their cost, $400.

17. Paid advertising expense, $5,500.

23. Paid creditors on account, $7,000

Enter the following transactions on Page 19 of the two-column journal.

29. Paid miscellaneous expenses, $500.

30. Paid automobile expense (including rental charges for an automobile), $2,500.

31. Discovered an error in computing a commission; received cash from the salesperson for the overpayment, $8,000.

31. Paid salaries and commissions for the month, $18,000.

31. Recorded revenue earned and billed to clients during the month, $112,000.

31. Purchased land for a future building site for $75,000, paying $10,000 in cash and giving a note payable for the remainder.

31. Withdrew cash for personal use, $12,000.

31. Rented land purchased on August 31 to a local university for use as a parking lot during football season (September, October, and November); received advance payment of $4,000.

Instructions

1. Record the August 1 balance of each account in the appropriate balance column of a four-column account, write Balance in the item section, and place a check mark (v) in the Posting Reference column.

2. Journalize the transactions for August in a two-column journal beginning on Page 18. Journal entry explanations may be omitted.

3. Post to the ledger, extending the account balance to the appropriate balance column after each posting.

4. Prepare an unadjusted trial balance of the ledger as of August 31, 2012.

5. Assume that the August 31 transaction for Sandy Ulrich’s cash withdrawal should have been $1,200. (a) Why did the unadjusted trial balance in (4) balance? (b) Journalize the correcting entry. (c) Is this error a transposition or slide?