Ask Me Help Desk - Journal entries.

Quote:

On September 25th a backhoe to Mission Landscaping at a price of $100 per day, to be paid when the backhoe is returned. Mission Landscaping expects to keep the backhoe for about two or three weeks.

I have this recorded as no journal entry, is that correct? Or would this need a entry if so if you could help point me in the right direction.

Well, that's kind of a nasty thing to give to a beginner. (I assume you meant to say on 9/25 they rented the backhoe to Mission? Be careful not to leave stuff out. I only figured out that you were the renter and not Mission cause of that little word "to" in there.)

The reason that's a nasty thing to give to a beginner is cause technically part of rent revenue is earned in September and the rest in October. Since monthly statements don't have to be totally correct like year-end ones do, I could see throwing the revenue into either September or October. However, since you don't know how long they're keeping it, it's difficult to record anything in September, isn't it? (In real life, statements are never done immediately, so you could wait until it's return and know, but this is a problem... ) So I'm going to agree with you, but quite honestly, I have no clue what your book is looking for on this. They really just shouldn't have thrown that in there.

Quote:

Last question being On September 17th purchased on account form earth movers inc. $340 in parts needed to repair a rental tractor. Payment is due in 10 days.

And then on the 27th Paid earth movers inc. the $340 amount owed from the 17th
Right now I have both entries done
17th being debit rental equipment and credit to accounts payable
27th being debit to accounts payable and credit to cash

Is that the correct way to do these entries or would I just record the second one when it is actually being paid?

OK, first off, not paying for something doesn't mean a financial transaction didn't happen. If you purchase something, then you purchased it, whether you pay for it now or not. Not only did you have the parts, but you also owe them for the parts. If you didn't actually get the parts, that would be different - like if you only signed a paper stating you were getting something and would owe for, then nothing has actually happened yet. But you do have the parts and owe for them. So yes you have to do the first entry too.

Not to mention the fact that you wouldn't be able to do the second entry if you didn't do the first. How can you take something out of payables if you never stuck it in there to begin with?

Except there's a minor error for the first entry. It says "parts needed to repair a rental tractor." Parts for a repair. It doesn't say you purchased the rental tractor itself. You purchased parts. Since it says the repair on "a" rental tractor, I'm assuming this means the repair is being done at this point in time, as opposed to putting them into like a parts inventory. If they're all being used for this repair right at this time, that makes it a Repairs Expense.

But except for that slight correction on that first debit, the rest is correct.

I'm real curious about your textbook because the way these are set up and worded is not very typical.