PROBLEM $3\mathrm{.}2$A Analyzing and Journalizing Transactions LO$3-3,$ LO$3-4,$ LO$3-5,$ LO$3-6,$ LO$3-7,$ LO$3-8$

Environmental Services, Inc., performs various tests on wells and septic systems. A few of the company$$s business transactions occurring during August are described as follows:

On August $1,$ the company billed customers $$10,000$ on account for services rendered. $$Customers are required to make full payment within $30$ days. $($Environmental Services uses an account entitled Testing Service Revenue when billing customers.$)$

On August $3,$ the company purchased testing supplies costing $$15,200,$ paying $$3,200$ cash and charging the remainder on the company$$s $30-$day account at Penn Chemicals. The testing supplies are expected to last several months.

On August $5,$ the company returned to Penn Chemicals $$400$ of testing supplies that were not needed. The return of these supplies reduced by $$400$ the amount owed to Penn Chemicals.

On August $17,$ the company issued an additional $2,500$ shares of capital stock at $$32$ per share. The cash raised will be used to purchase new testing equipment in September.

On August $22,$ the company received $$9,600$ cash from customers it had billed on August $1.$

On August $29,$ the company paid its outstanding account payable to Penn Chemicals.

On August $30,$ a cash dividend totaling $$8,600$ was declared and paid to the company$$s stockholders $($use Dividends account$).$

Instructions

Prepare an analysis of each of these transactions. Transaction $1$ serves as an example of the form of analysis to be used.

The asset Accounts Receivable was increased. Increases in assets are recorded by debits. Debit Accounts Receivable $$10,000.$

Revenue has been earned. Revenue increases owners$$ equity. Increases in owners$$ equity are recorded by credits. Credit Testing Service Revenue $$10,000.$

Prepare journal entries, including explanations, for these transactions.

How does the realization principle influence the manner in which the August $1$ billing to customers is recorded in the accounting records?

How does the matching principle influence the manner in which the August $3$ purchase of testing supplies is recorded in the accounting records?