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ACC 205 Week 1 Exercise 7 Journal entry preparation

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Product Description

7. Journal entry preparation

On January 1 of the current year, Peter Houston invested $80,000 cash into his company MuniServ. The

cash was obtained from an owner investment by Peter Houston of $50,000 and a $30,000 bank loan.

Shortly thereafter, the company acquired selected assets of a bankrupt competitor. The acquisition

included land ($10,000), a building ($40,000), and vehicles ($10,000). MuniServ paid $45,000 at the time

of the transaction and agreed to remit the remaining balance due of $15,000 (an account payable) by

February 15.

During January, the company had additional cash outlays for the following items:

Purchases of store equipment $4,600

Loan payment 500

Salaries expense 2,300

Advertising expense 700

The January utilities bill of $200 was received on January 31 and will be paid next month. MuniServ

rendered services to clients on account amounting to $9,400. All customers have been billed; by month

end, $3,700 had been received in settlement of account balances.

Instructions

a. Present journal entries that reflect MuniServ's January transactions, including the $80,000 raised

from the owner investment and loan. (See exhibit 2.6)ACC205: b. Compute the total debits, total credits, and ending balance that would be found in the company's

Cash account. (Post to “T” Accounts, see exhibit 2.3 and 2.4)

c. Determine the amount that would be shown on the January 31 trial balance for Accounts Payable.

Is the balance a debit or a credit?

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