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
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.
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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