JB Paint Designs began operations on April 1, 2014. Th
Question and Solution
JB Paint Designs began operations on April 1, 2014. The company completed the following transactions in its first mont
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JB Paint Designs began operations on April 1, 2014. The company completed the following transactions in its first month: Apr. 1 The owner, Jay Barr, invested $13,500 cash in the company. 2 Purchased a one-year insurance policy effective April 1, and paid the first month's premium of $115. 2 Purchased equipment for $5,000 on account. 3 Paid for $435 of supplies. 7 Paid cash for $870 of advertising expenses. 8 Finished a painting project for Maya Angelina and collected $750 cash. 10 Received a $1,500 contract from a customer, SUB Terrain Inc., to paint its new office space. SUB Terrain will pay when the project is complete. 25 Completed the contract with SUB Terrain Inc. from April 10 and collected the amount owing. 28 The owner, Jay Barr, withdrew $975 cash for his personal use. 29 Received $1,250 cash from Memphis Sheik for a painting project that JB Paint Designs will start on May 5. 30 Paid for the equipment purchased on account on April 2. Instructions (a) For each transaction, indicate: (1) The basic type of account debited and credited (asset, liability, or owner's equity); (2) The specific account debited and credited (Cash, Rent Expense, Service Revenue, etc.); and (3) Whether each account is increased (1) Or decreased (2), and by what amount. Use the following format, in which the first transaction is given as an example: (b) Prepare a journal entry for each transaction. TAKING IT FURTHER Jay doesn't understand why a debit increases the cash account and yet a credit to J. Barr, Capital increases that account. He reasons that debits and credits cannot both increase account balances. Explain to Jay why he is wrong.
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