Your friend, Dean McChesney, requested that you advise him on the effects that certain transactions will have on his business, A-Plus Travel Planners; Time is short, so you cannot journalize the transactions. Instead, you must analyze the transactions without a journal. McChesney will continue the business only if he can expect to earn a monthly net income of $6,000. The business completed the following transactions during June:McChesney deposited $10,000 cash in a business bank account to start the company. The company issued common stock to McChesney.Paid $300 cash for office supplies.Incurred advertising expense on account, $700.Paid the following cash expenses: administrative assistant’s salary, $1,400; office rent, $1,000.Earned service revenue on account, $8,800.Collected cash from customers on account, $1,200.RequirementsOpen the following T-accounts: Cash; Accounts Receivable; Office Supplies; Accounts Payable; Common Stock; Service Revenue; Salaries Expense; Rent Expense; and Advertising Expense.Post the transactions directly to the accounts without using a journal. Record each transaction by letter. Calculate account balances.Prepare a trial balance at June 30, 2018.Compute the amount of net income or net loss for this first month of operations. Would you recommend that McChesney continue in business?

Question
Asked Dec 14, 2019
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Your friend, Dean McChesney, requested that you advise him on the effects that certain transactions will have on his business, A-Plus Travel Planners; Time is short, so you cannot journalize the transactions. Instead, you must analyze the transactions without a journal. McChesney will continue the business only if he can expect to earn a monthly net income of $6,000. The business completed the following transactions during June:

  • McChesney deposited $10,000 cash in a business bank account to start the company. The company issued common stock to McChesney.
  • Paid $300 cash for office supplies.
  • Incurred advertising expense on account, $700.
  • Paid the following cash expenses: administrative assistant’s salary, $1,400; office rent, $1,000.
  • Earned service revenue on account, $8,800.
  • Collected cash from customers on account, $1,200.

Requirements

  1. Open the following T-accounts: Cash; Accounts Receivable; Office Supplies; Accounts Payable; Common Stock; Service Revenue; Salaries Expense; Rent Expense; and Advertising Expense.
  2. Post the transactions directly to the accounts without using a journal. Record each transaction by letter. Calculate account balances.
  3. Prepare a trial balance at June 30, 2018.
  4. Compute the amount of net income or net loss for this first month of operations. Would you recommend that McChesney continue in business?
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Expert Answer

Step 1

1.) Attached above are the t-accounts prepared by recording transactions with letters. 

The closing accout balances for june 30 are highlighted in bold in each t account. 

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Accounts payable Date Debit (in $) Cash Debit (in $) Date Credit (in $) 700 Particulars Particulars Date Credit (in $ Particulars Particulars Date June 10000 June 1200 June 300 June G в June 1400 30-Jun Closing Balance c/t 700 700 1000 June 700 Salaries expenses Debit (in $) Date 30-Jun 8500 11200 Closing Balance c/f Credit (in $) Particulars Particulars Date 11200 June в 1400 30-Jun Closing Balance c/f Common Stock 1400 Credit (in $) Particulars Debit (in $) Date June Particulars 1400 1400 Date IA 10000 Rent Expenses Debit (in $) Date 1000 30-Jun Closing Balance c/f 10000 Particulars Credit (in $) Date Particulars 10000 10000 June Office Supplies Debit (in $) Date 300 30-Jun Closing Balance c/f 1000 1000 Credit (in $) 1000 Particulars Particulars Date June service revenue Particulars Debit (in $) Date Credit (in $) 8800 Particulars Date 30-Jun Closing Balance c/f 300 June 300 300 30-Jun Closing Balance c/f 8800 8800 8800 Advertising expense Debit (in $) Date Credit (in $) Particulars ID Particulars Date Accounts receivables 700 June Particulars Credit (in $) 1200 Debit (in $) Date 8800 Particulars Date IF June 30-Jun Closing Balance c/f 700 30-Jun Closing Balance c/f 7600 700 700 8800 8800

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Step 2

2.) Attached above is the trial balance as on 30th June 2018 u...

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Trial Balance for the month ended 30th June 2018 Amnt in Debit $ Amnt in Credit $ 8500 Particulars Cash Common Stock office supplies Advertising expense 10000 300 700 Accounts payable 700 Salaries expense Rent expenses Service revenue 1400 1000 8800 7600 Accounts receivables Total 19500 19500

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