Lyons, Inc., provides consulting services. A few of the company’s business transactions occurring during June are described below:
On June 1, the company billed customers $5,000 on account for consulting services rendered. Customers are required to make full payment within 30 days.
On June 3, the company purchased office supplies costing $3,200, paying $800 cash and charging the remainder on the company’s 30-day account at Office Warehouse. The supplies are expected to last several months.
On June 5, the company returned to Office Warehouse $100 of supplies that were not needed. The return of these supplies reduced by $100 the amount owed to Office Warehouse.
On June 17, the company issued an additional 1,000 shares of capital stock at $5 per share. The cash raised will be used to purchase new equipment in September.
On June 22, the company received $1,200 cash from customers it had billed on June 1.
On June 29, the company paid its outstanding account payable to Office Warehouse.
On June 30, a cash dividend totaling $1,800 was declared and paid to the company’s stock holders.
Prepare an analysis of each of the above transactions. Transaction 1 serves as an example of the form of analysis to be used.
(a) The asset Accounts Receivable was increased. Increases in assets are recorded by debits. Debit Accounts Receivable $5,000.
(b) Revenue has been earned. Revenue increases owners’ equity. Increases in owners’ equity are recorded by credits. Credit Consulting Revenue $5,000.
Prepare journal entries, including explanations, for the above transactions.
How does the realization principle influence the manner in which the June 1 billings to customers are recorded in the accounting records?
How does the matching principle influence the manner in which the June 3 purchase of supplies is recorded in the accounting records?

  • CreatedApril 17, 2014
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