1. Analyzing General Journal Entries.
The following general journal entries (presented in a simplified format) were made recently by the bookkeeper of Chandlers' Hilltop Texaco:
Account Debit Credit
Interest Expense 270
Notes Payable 4,000
(1) Briefly describe the transaction that resulted in each of these journal entries.
(2) Suppose that the bookkeeper inadvertently recorded the third entry by debit¬ing Notes Payable and crediting Equipment, each for $4,000. How would this error have affected the assets and liabilities of Chandlers' Hilltop Texaco?
(3) How would the error in Part 2 affect the trial balance prepared at the end of the period for Chandlers' Hilltop Texaco?
2. General Journal Entries
Following are two recent transactions of Grady Real Estate Company:
(a) Received $24,000 advance payment for one year's rent on an office building being leased to an accounting firm by Grady.
(b) Paid $6,000 in advance for six months of newspaper advertising.
(1) Prepare a general journal entry to record each of these transactions in Grady's accounting records.
(2) Prepare a general journal entry for each transaction from the point of view of the other party (company) to the transaction.
(3) Were Grady's total assets increased, decreased, or unchanged as a result of each of these transactions?
You will find the answer to this puzzling assignment inside...