Author Question: The purchase of an asset on account and making a partial payment results in all of the following ... (Read 55 times)

formula1 · **on:** Jul 5, 2018

The purchase of an asset on account and making a partial payment results in all of the following EXCEPT
a. an increase in an asset account.
b. a decrease in the Cash account.
c. a balanced accounting equation.
d. an increase in owner's equity.

Question 2

(Journal entries - budgetary and financial)

Prepare journal entries to record the following transactions for Cosmotown for 2013 . The Town records encumbrances only for its Supplies appropriation.

a. Cosmotown adopted the following budget for the year:
Revenues:
Property taxes 275,000
Licenses and fees 35,000
Appropriations:
Salaries 255,000
Supplies 40,000
Interest 1,500
b. Property tax bills amounting to 275,000 were sent to the property owners.
c. Because property taxes were not due to be received for several months and the town needed cash to finance its activities, Cosmotown borrowed 100,000 from a local bank using tax anticipation notes.
d. Cosmotown paid salaries in the amount of 75,000.
e. The town sent out two purchase orders for supplies: purchase order A for 6,000 and purchase order B for 5,000.
f. The town received 130,000 from property owners in payment of their property taxes.
g. Cosmotown repaid the bank on its borrowing in transaction c. The amount paid was 101,000, which included interest of 1,000.
h. The town collected 15,000 for fishing licenses.
i. The town received the supplies ordered on purchase order A in transaction e. All the supplies arrived in good condition and the invoice for 6,100 was approved for payment.
j. The town Treasurer paid the invoice in transaction i. for 6,100.

irishcancer18 · **Reply #1 on:** Jul 5, 2018

Answer to Question 1

d

Answer to Question 2

a. Estimated revenues - property taxes 275,000
Estimated revenues - licenses and fees 35,000
Appropriations - salaries 255,000
Appropriations - supplies 40,000
Appropriations - interest 1,500
Budgetary fund balance 13,500

b. Property taxes receivable 275,000
Revenues - property taxes 275,000

c. Cash 100,000
Tax anticipation notes payable 100,000

d. Expenditures - salaries 75,000
Cash 75,000

e. Encumbrances 11,000
Budgetary fund balance reserved for encumbrances 11,000

f. Cash 130,000
Property taxes receivable 130,000

g. Tax anticipation notes payable 100,000
Expenditures - interest 1,000
Cash 101,000

h. Cash 15,000
Revenues - licenses and fees 15,000

i. Budgetary fund balance reserved for encumbrances 6,000
Encumbrances 6,000

Expenditures - supplies 6,100
Vouchers payable 6,100

j. Vouchers payable 6,100
Cash 6,100