Concept explainers
Accounting for the Establishment of a New Business (the Accounting Cycle)
Penny Cassidy has decided to start her business. Penny’s Pool Service & Supply, Inc. (PPSS). There is much to do when starting a new business. Here are some transactions that have occurred in the business in March.
- a. Received $25,000 cash and a large delivery van with a value of $36,000 from Penny, who was given 4,000 shares of $0.05 par value common stock in exchange.
- b. Purchased land with a small office and warehouse by paying $10,000 cash and signing a 10-year mortgage note payable to the local bank for $80,000. The land has a value of $18,000 and the building’s value is $72,000. Use separate accounts for land and buildings.
- c. Purchased a new computer from Dell for $2,500 cash and office furniture for $4,000, signing a short-term note payable in six months.
- d. Hired a receptionist for the office at a salary of $1,500 per month, starting in April.
- e. Paid $1,000 on the note payable to the bank at the end of March (ignore interest).
- f. Purchased short-term investments in the stock of other companies for $5,000 cash.
- g. Ordered $10,000 in inventory from Pool Corporation, Inc., a pool supply wholesaler, to be received in April.
Required:
- 1. For each of the events (a) through (g), prepare
journal entries if a transaction of the business exists, checking that debits equal credits. If a transaction does not exist, explain why there is no transaction for the business. - 2. Create T-accounts, and post each of the transactions to determine balances at March 31. Because this is a new business, beginning balances are $0.
- 3. Prepare a
trial balance on March 31 to check that debits equal credits after the transactions are posted to the T-accounts. - 4. From the trial balance, prepare a classified balance sheet (with current assets and current liabilities sections) at March 31 (before the beginning of operations in April).
- 5. For each of the events (a) through (g), indicate if it is an investing activity (I) or financing activity (F), and the direction (+ for increases; − for decreases) and amount of the effect on cash flows using the following structure. Write NE if there is no effect on cash flows.
|
|
|
(a) | ||
(b) etc. |
- 6. Calculate the
current ratio at March 31. What does this ratio indicate about the ability of PPSS to pay its current liabilities?
1.
Prepare the journal entries for the given events.
Explanation of Solution
Journal:
Journal is the method of recording monetary business transactions in chronological order. It records the debit and credit aspects of each transaction to abide by the double-entry system.
Rules of Debit and Credit:
Following rules are followed for debiting and crediting different accounts while they occur in business transactions:
- Debit, all increase in assets, expenses and dividends, all decrease in liabilities, revenues and stockholders’ equities.
- Credit, all increase in liabilities, revenues, and stockholders’ equities, all decrease in assets, expenses.
Journal entries of Company P are as follows:
a. Issuance of common stock:
Date | Accounts title and explanation | Ref. | Debit ($) | Credit ($) |
Cash (+A) | 25,000 | |||
Equipment (+A) | 36,000 | |||
Common stock (+SE) (1) | 200 | |||
Additional paid-in capital (+SE) (2) | 60,800 | |||
(To record the issuance of common stock) |
Table (1)
- Cash is an assets account and it increased the value of asset by $25,000. Hence, debit the cash account for $25,000.
- Equipment is an assets account and it increased the value of asset by $36,000. Hence, debit the equipment account for $36,000.
- Common stock is a component of stockholder’s equity and it increased the value of stockholder’s equity by $200. Hence, credit the common stock for $200.
- Additional paid-in capital is a component of stockholder’s equity and it increased the value of stockholder’s equity by $60,800. Hence, credit the additional paid-in capital for $60,800.
Working note:
Calculate the value of common stock
Calculate the value of additional paid in capital
b. Purchase of building and land on notes and in cash:
Date | Accounts title and explanation | Ref. | Debit ($) | Credit ($) |
Land (+A | ||||
Building (+A) | 18,000 | |||
Cash (-A) | 72,000 | 10,000 | ||
Mortgage notes payable (+L) | 80,000 | |||
(To record purchase of land and building on note and in cash) |
Table (2)
- Land is an assets account and it increased the value of asset by $18,000. Hence, debit the land account for $18,000.
- Building is an assets account and it increased the value of asset by $72,000. Hence, debit the building account for $72,000.
- Cash is an assets account and it decreased the value of asset by $10,000. Hence, credit the cash account for $10,000.
- Mortgage notes payable is a liability account, and it increased the value of liabilities by $80,000. Hence, credit the mortgage notes payable for $80,000.
c. Purchase of equipment on notes and cash:
Date | Accounts title and explanation | Ref. | Debit ($) | Credit ($) |
Equipment (+A) | 6,500 | |||
Cash (-A) | 2,500 | |||
Short-term notes payable (+L) | 4,000 | |||
(To record purchase of equipment on account and in cash) |
Table (3)
- Equipment is an assets account and it increased the value of asset by $6,500. Hence, debit the equipment account for $6,500.
- Cash is an assets account and it decreased the value of asset by $2,500. Hence, credit the cash account for $2,500.
- Short-term notes payable is a liability account, and it increased the value of liabilities by $4,000. Hence, credit the notes payable for $4,000.
d. Hiring of new employee:
In this case, journal entry is not required, because it is not a business transaction.
e. Cash paid to bank:
Date | Accounts title and explanation | Ref. | Debit ($) | Credit ($) |
Mortgage notes payable (+L) | 1,000 | |||
Cash (+A) | 1,000 | |||
(To record cash paid to creditors) |
Table (4)
- Mortgage notes payable is a liability account, and it decreased the value of liabilities by $1,000. Hence, debit the mortgage notes payable for $1,000.
- Cash is an assets account and it decreased the value of asset by $1,000. Hence, credit the cash account for $1,000.
f. Purchase of short-term investment:
Date | Accounts title and explanation | Ref. | Debit ($) | Credit ($) |
Short-term investments (A+) | 5,000 | |||
Cash (-A) | 5,000 | |||
(To record purchase of short-term investment) |
Table (6)
- Short-term investment is an assets account and it increased the value of asset by $5,000. Hence, debit the short-term investment account for $5,000.
- Cash is an assets account and it decreased the value of asset by $5,000. Hence, credit the cash account for $5,000.
g. Ordered inventory from Company PC:
In this case, journal entry is not required, because it is not a business transaction.
2.
Prepare T-account for the given transaction.
Explanation of Solution
T-account:
T-account refers to an individual account, where the increases or decreases in the value of specific asset, liability, stockholder’s equity, revenue, and expenditure items are recorded.
This account is referred to as the T-account, because the alignment of the components of the account resembles the capital letter ‘T’.’ An account consists of the three main components which are as follows:
- (a) The title of the account
- (b) The left or debit side
- (c) The right or credit side
T-accounts of company P are as follows:
Cash | |||
Beg. | 0 | ||
(a) | 25,000 | 10,000 | (b) |
2,500 | (c) | ||
1,000 | (e) | ||
5,000 | (f) | ||
6,500 |
Short-term Investments | |||
Beg. | 0 | ||
(f) | 5,000 | ||
5,000 |
Equipment | |||
Beg. | 0 | ||
(a) | 36,000 | ||
(c) | 6,500 |
Land | |||
Beg. | 0 | ||
(b) | 18,000 | ||
18,000 |
Buildings | |||
Beg. | 0 | ||
(b) | 72,000 | ||
72,000 |
Short-term Notes Payable | |||
0 | Beg. | ||
4,000 | (c) | ||
4,000 |
Mortgage Notes Payable | |||
0 | Beg. | ||
(e) | 1,000 | 80,000 | (b) |
79,000 |
Common Stock | |||
0 | Beg. | ||
200 | (a) | ||
200 |
Additional Paid-in Capital | |||
0 | Beg. | ||
60,800 | (a) | ||
60,800 |
3.
Prepare the trial balance of Company P on March, 31.
Explanation of Solution
Trial balance:
Trial balance is the summary of accounts, and their debit and credit balances at a given time. It is usually prepared at end of the accounting period. Debit balances are listed in left column and credit balances are listed in right column. The totals of debit and credit column should be equal. Trial balance is useful in the preparation of the financial statements.
Trial balance of Company P is as follows:
Company P | ||
Trial Balance | ||
March, 31 | ||
Particulars | Debit ($) | Credit ($) |
Cash | $6,500 | |
Short-term investments | 5,000 | |
Equipment | 42,500 | |
Land | 18,000 | |
Buildings | 72,000 | |
Short-term notes payable | $4,000 | |
Mortgage notes payable | 79,000 | |
Common stock | 200 | |
Additional paid-in capital | 60,800 | |
Totals | $144,000 | $144,000 |
Table (7)
Therefore, the total of debit, and credit columns of trial balance is $144,000 and agree.
4.
Prepare the classified balance sheet of Company P.
Explanation of Solution
Classified balance sheet:
This is the financial statement of a company which shows the grouping of similar assets and liabilities under subheadings.
Classified balance sheet of Company P on January, 31 is as follows:
Company P | ||
Balance Sheet | ||
On March 31 | ||
Assets | $ | $ |
Current Assets: | ||
Cash | 6,500 | |
Short-term investments | 5,000 | |
Total current assets | 11,500 | |
Equipment | 42,500 | |
Land | 18,000 | |
Buildings | 72,000 | |
Total assets | 144,000 | |
Liabilities and Stockholder’s Equity | ||
Current Liabilities: | ||
Short-term notes payable | 4,000 | |
Total current liabilities | 4,000 | |
Mortgage notes payable | 79,000 | |
Total liabilities | 83,000 | |
Stockholder’s Equity: | ||
Common stock ($0.05 par value) | 200 | |
Additional paid-in capital | 60,800 | |
Total stockholder’s equity | 61,000 | |
Total liabilities and stockholder’s equity | 144,000 |
Table (8)
Therefore, the total assets of Company P are $144,000, and the total liabilities and stockholders’ equity is $144,000.
5.
Indicate whether each of given item is an investing (I) or financing (F), also indicate effect on the cash flow (+ for increase, – for decrease and NE for no effect).
Explanation of Solution
Statement of cash flows: Statement of cash flow is a financial statement that shows the cash and cash equivalents of a company for a particular period of time. It shows the net changes in cash, by reporting the sources and uses of cash as a result of operating, investing, and financing activities of a company.
Transaction | Type of Activity |
Effect on Cash |
(a) Issuance of common stock | Financing activity | Increased by $25,000 |
(b) Purchase of land and buildings | Investing activity | Decreased by $3,400 |
(c) Purchase of new equipment and office furniture | Investing activity | Decreased by $2,500 |
(d) Hiring of new employee | No effect | No effect |
(e) Cash paid to bank on notes playable | Financing activity | Decreased by $1,000 |
(f) Purchase of short-term investment | Investing activity | Decreased by $5,000 |
(g) Ordered inventory from Company P | No effect | No effect |
Table (9)
(a) Issuance of common stock: In this transaction, issuance of common stock is the finance source of the company, and it is cash inflow of the company. So, issuance common stock is reported under financing activity section of cash flow statement and it increased the value of cash by $25,000.
(b) Purchase of land and buildings: In this transaction, company purchased land and building for investing purpose, and it decreased the value of cash. So, purchase of land and building is reported under investing activity section of cash flow statement, and it decreased the value of cash by $10,000.
(c) Purchase of new equipment and office furniture: In this transaction, company purchased new equipment and office furniture for investing purpose, and it decreased the value of cash. So, purchase of equipment is reported under investing activity section of cash flow statement, and it decreased the value of cash by $2,500.
(d) Hiring of new employee: In this case, ordered wood and raw materials is not creating any impact on assets, liabilities and stockholder’s equity of the business, because it is not a business transaction.
(e) Cash paid to bank on notes playable: In this transaction, company paid loan amount to bank for financing purpose, and it is cash outflow of the company. So, cash paid to bank is reported under financing activity section of cash flow statement and it decreased the value of cash by $1,000
(f) Purchase of short-term investment: In this transaction, company purchased short-term investment for investing purpose, and it decreased the value of cash. So, purchase of short-term investment is reported under investing activity section of statement of cash flow, and it decreased the value of cash by $5,000.
(g) Ordered inventory from Company P: In this case, ordered inventory is not creating any impact on assets, liabilities and stockholder’s equity of the business, because it is not a business transaction.
6.
Calculate the current ratio of Company P and evaluate the ratio.
Explanation of Solution
Current Ratio:
A part of liquidity ratios, current ratio reflects the ability to oblige the short term debts of a company. It is calculated based on the current assets and current liabilities; a company has in an accounting period. A current ratio is a useful tool for analysis of financials of a company.
Calculate the current ratio of Company P as follows:
Here,
Current assets = $11,500 (3)
Current liabilities= $4,000 (short-term notes payable)
Therefore, the current ration of Company P is 2.875
In this case, Company P has more current assets than current liabilities. Therefore, Company P has better position to repay the current liabilities.
Working note:
Calculate the value of current assets
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Chapter 2 Solutions
FIN.ACCTG:ACC 101 CUST.CONNECT-W/ETXT C
- Transaction Analysis and Financial Statements Expert Consulting Services Inc. was organized on March 1 by two former college roommates. The corporation provides computer consulting services to small businesses. The following transactions occurred during the first month of operations: March 2: Received contributions of $20,000 from each of the two principal owners of the new business in exchange for shares of stock. March 7: Signed a two-year promissory note at the bank and received cash of $15,000. Interest, along with the $15,000, will be repaid at the end of the two years. March 12: Purchased $700 in miscellaneous supplies on account. The company has 30 days to pay for the supplies. March 19: Billed a client $4,000 for services rendered by Expert in helping to install a new computer system. The client is to pay 25% of the bill upon its receipt and the remaining balance within 30 days. March 20: Paid $1,300 bill from the local newspaper for advertising for the month of March. March 22: Received 25% of the amount billed to the client on March 19. March 26: Received cash of $2,800 for services provided in assisting a client in selecting software for its computer. March 29: Purchased a computer system for $8,000 in cash. March 30: Paid $3,300 of salaries and wages for March. March 31: Received and paid $1,400 in gas, electric, and water bills. Required Prepare a table to summarize the preceding transactions as they affect the accounting equation. Use the format in Exhibit 3-1. Identify each transaction with the date. Prepare an income statement for the month of March. Prepare a classified balance sheet at March 31. From reading the balance sheet you prepared in part (3), what events would you expect to take place in April? Explain your answer.arrow_forwardTransaction Analysis and Financial Statements Just Rolling Along Inc. was organized on May 1 by two college students who recognized an opportunity to make money while spending their days at a beach along Lake Michigan. The two entrepreneurs plan to rent bicycles and in-line skates to weekend visitors to the lakefront. The following transactions occurred during the first month of operations: May 1: Received contribution of $9,000 from each of the two principal owners of the new business in exchange for shares of stock. May 1: Purchased ten bicycles for $300 each on an open account. The company has 30 days to pay for the bicycles. May 5: Registered as a vendor with the city and paid the $15 monthly fee. May 9: Purchased 20 pairs of in-line skates at $125 per pair, 20 helmets at $50 each, and 20 sets of protective gear (knee and elbow pads and wrist guards) at $45 per set for cash. May 10: Purchased $100 in miscellaneous supplies on account. The company has 30 days to pay for the supplies. May 15: Paid $125 bill from local radio station for advertising for the last two weeks of May. May 17: Customers rented in-line skates and bicycles for cash of $1,800. May 24: Billed the local park district $1,200 for in-line skating lessons provided to neighborhood children. The park district is to pay one-half of the bill within five working days and the rest within 30 days. May 29: Received 50% of the amount billed to the park district. May 30: Customers rented in-line skates and bicycles for cash of $3,000. May 30: Paid wages of $160 to a friend who helped over the weekend. May 31: Paid the balance due on the bicycles. Required Prepare a table to summarize the preceding transactions as they affect the accounting equation. Use the format in Exhibit 3-1. Identify each transaction with the date. Prepare an income statement for the month of May. Prepare a classified balance sheet at May 31. Why do you think the two college students decided to incorporate their business rather than operate it as a partnership?arrow_forwardOn March 1 of this year, B. Gervais established Gervais Catering Service. The account headings are presented below. Transactions completed during the month follow. a. Gervais deposited 25,000 in a bank account in the name of the business. b. Bought a truck from Kelly Motors for 26,329, paying 8,000 in cash and placing the balance on account, Ck. No. 500. c. Bought catering equipment on account from Luigis Equipment, 3,795. d. Paid the rent for the month, 1,255, Ck. No. 501. e. Bought insurance for the truck for one year, 400, Ck. No. 502. f. Sold catering services for cash for the first half of the month, 3,012. g. Bought supplies for cash, 185, Ck. No. 503. h. Sold catering services on account, 4,307. i. Received and paid the heating bill, 248, Ck. No. 504. j. Received a bill from GC Gas and Lube for gas and oil for the truck, 128. k. Sold catering services for cash for the remainder of the month, 2,649. l. Gervais withdrew cash for personal use, 1,550, Ck. No. 505. m. Paid the salary of the assistant, 1,150, Ck. No. 506. Required 1. Record the transactions and the balance after each transaction. 2. Total the left side of the accounting equation (left side of the equal sign), then total the right side of the accounting equation (right side of the equal sign). If the two totals are not equal, check the addition and subtraction. If you still cannot find the error, re-analyze each transaction.arrow_forward
- On March 1 of this year, B. Gervais established Gervais Catering Service. The account headings are presented below. Transactions completed during the month follow. a. Gervais deposited 25,000 in a bank account in the name of the business. b. Bought a truck from Kelly Motors for 26,329, paying 8,000 in cash and placing the balance on account, Ck. No. 500. c. Bought catering equipment on account from Luigis Equipment, 3,795. d. Paid the rent for the month, 1,255, Ck. No. 501 (Rent Expense). e. Bought insurance for the truck for one year, 400, Ck. No. 502. f. Sold catering services for cash for the first half of the month, 3,012 (Catering Income). g. Bought supplies for cash, 185, Ck. No. 503. h. Sold catering services on account, 4,307 (Catering Income). i. Received and paid the heating bill, 248, Ck. No. 504 (Utilities Expense). j. Received a bill from GC Gas and Lube for gas and oil for the truck, 128 (Gas and Oil Expense). k. Sold catering services for cash for the remainder of the month, 2,649 (Catering Income). l. Gervais withdrew cash for personal use, 1,550, Ck. No. 505. m. Paid the salary of the assistant, 1,150, Ck. No. 506 (Salary Expense). Required 1. In the equation, write the owners name above the terms Capital and Drawing. 2. Record the transactions and the balance after each transaction. Identify the account affected when the transaction involves revenues or expenses. 3. Write the account totals from the left side of the equals sign and add them. Write the account totals from the right side of the equals sign and add them. If the two totals are not equal, check the addition and subtraction. If you still cannot find the error, re-analyze each transaction.arrow_forwardThe transactions completed by PS Music during June 20Y5 were described at the end of Chapter 1. The following transactions were completed during July, the second month of the businesss operations: July 1. Peyton Smith made an additional investment in PS Music in exchange for common stock by depositing 5,000 in PS Musics checking account. 1. Instead of continuing to share office space with a local real estate agency, Peyton decided to rent office space near a local music store. Paid rent for July, 1,750. 1. Paid a premium of 2,700 for a comprehensive insurance policy covering liability, theft, and fire. The policy covers a one-year period. 2. Received 1,000 on account. 3. On behalf of PS Music, Peyton signed a contract with a local radio station, KXMD, to provide guest spots for the next three months. The contract requires PS Music to provide a guest disc jockey for 80 hours per month for a monthly fee of 3,600. Any additional hours beyond 80 will be billed to KXMD at 40 per hour. In accordance with the contract, Peyton received 7,200 from KXMD as an advance payment for the first two months. 3. Paid 250 on account. 4. Paid an attorney 900 for reviewing the July 3 contract with KXMD. (Record as Miscellaneous Expense.) 5. Purchased office equipment on account from Office Mart, 7,500. 8. Paid for a newspaper advertisement, 200. 11. Received 1,000 for serving as a disc jockey for a party. 13. Paid 700 to a local audio electronics store for rental of digital recording equipment. 14. Paid wages of 1,200 to receptionist and part-time assistant. Enter the following transactions on Page 2 of the two-column journal: 16. Received 2,000 for serving as a disc jockey for a wedding reception. 18. Purchased supplies on account, 850. 21. Paid 620 to Upload Music for use of its current music demos in making various music sets. 22. Paid 800 to a local radio station to advertise the services of PS Music twice daily for the remainder of July. 23. Served as disc jockey for a party for 2,500. Received 750, with the remainder due August 4, 20Y5. 27. Paid electric bill, 915. 28. Paid wages of 1,200 to receptionist and part-time assistant. 29. Paid miscellaneous expenses, 540. 30. Served as a disc jockey for a charity ball for 1,500. Received 500, with the remainder due on August 9, 20Y5. 31. Received 3,000 for serving as a disc jockey for a party. 31. Paid 1,400 royalties (music expense) to National Music Clearing for use of various artists music during July. 31. Paid dividends, 1,250. PS Musics chart of accounts and the balance of accounts as of July 1, 20Y5 (all normal balances), are as follows: Instructions 1. Enter the July 1, 20Y5, account balances in the appropriate balance column of a four-column account. Write Balance in the Item column, and place a check mark () in the Posting Reference column. (Hint: Verify the equality of the debit and credit balances in the ledger before proceeding with the next instruction.) 2. Analyze and journalize each transaction in a two-column journal beginning on Page 1, omitting journal entry explanations. 3. Post the journal to the ledger, extending the account balance to the appropriate balance column after each posting. 4. Prepare an unadjusted trial balance as of July 31, 20Y5.arrow_forwardA business has the following transactions: A. The business is started by receiving cash from an investor in exchange for common stock $10,000. B. Rent of $1,250 is paid for the first month. C. Office supplies are purchased for $375. D. Services worth $3,450 are performed. Cash is received for half. E. Customers pay $1,250 for services to be performed next month. F. $6,000 is paid for a one year insurance policy. G. We receive 25% of the money owed by customers in D. H. A customer has placed an order for $475 of services to be done this coming week. How much total revenue does the company have?arrow_forward
- George Hoskin started his own business, Hoskin Hauling. The following transactions occurred in the first two weeks: A. George Hoskin contributed cash of $12,000 and a truck worth $10,000 to start the business. He received Common Stock in return. B. Paid two months rent in advance, $800. C. Agreed to do a hauling job for a price of $1,200. D. Performed the hauling job discussed in C. We will get paid later. E. Received payment of $600 on the hauling job done in D. F. Purchased gasoline on credit, $50. G. Performed another hauling job. Earned $750, was paid cash. Record the following transactions in T-accounts. Label each entry with the appropriate letter. Total the T-accounts when you are done.arrow_forwardANALYSIS OF TRANSACTIONS Charles Chadwick opened a business called Charlies Detective Service in January 20--. Set up T accounts for the following accounts: Cash; Accounts Receivable; Office Supplies; Computer Equipment; Office Furniture; Accounts Payable; Charles Chadwick, Capital; Charles Chadwick, Drawing; Professional Fees; Rent Expense; and Utilities Expense. The following transactions occurred during the first month of business. Record these transactions in T accounts. After all transactions are recorded, foot and balance the accounts if necessary. (a) Invested cash in the business, 30,000. (b) Bought office supplies for cash, 300. (c) Bought office furniture for cash, 5,000. (d) Purchased computer and printer on account, 8,000. (e) Received cash from clients for services, 3,000. (f) Paid cash on account for computer and printer purchased in transaction (d), 4,000. (g) Earned professional fees on account during the month, 9,000. (h) Paid cash for office rent for January, 1,500. (i) Paid utility bills for the month, 800. (j) Received cash from clients billed in transaction (g), 6,000. (k) Withdrew cash for personal use, 3,000. TRIAL BALANCE Based on the transactions recorded in Exercise 3-7A, prepare a trial balance for Charlies Detective Service as of January 31, 20--.arrow_forwardDiscuss how each of the following transactions for Watson, International, will affect assets, liabilities, and stockholders equity, and prove the companys accounts will still be in balance. A. An investor invests an additional $25,000 into a company receiving stock in exchange. B. Services are performed for customers for a total of $4,500. Sixty percent was paid in cash, and the remaining customers asked to be billed. C. An electric bill was received for $35. Payment is due in thirty days. D. Part-time workers earned $750 and were paid. E. The electric bill in C is paid.arrow_forward
- B. Kelso established Computer Wizards during November of this year. The accountant prepared the following chart of accounts: The following transactions occurred during the month: a. Kelso deposited 45,000 in a bank account in the name of the business. b. Paid the rent for the current month, 1,800, Ck. No. 2001. c. Bought office desks and filing cabinets for cash, 790, Ck. No. 2002. d. Bought a computer and printer from Cyber Center for use in the business, 2,700, paying 1,700 in cash and placing the balance on account, Ck. No. 2003. e. Bought a neon sign on account from Signage Co., 1,350. f. Kelso invested her personal computer software with a fair market value of 600 in the business. g. Received a bill from Country News for newspaper advertising, 365. h. Sold services for cash, 1,245. i. Received and paid the electric bill, 345, Ck. No. 2004. j. Paid on account to Country News, a creditor, 285, Ck. No. 2005. k. Sold services for cash, 1,450. l. Paid wages to an employee, 925, Ck. No. 2006. m. Received and paid the bill for the city business license, 75, Ck. No. 2007. n. Kelso withdrew cash for personal use, 850, Ck. No. 2008. o. Kelso withdrew cash for personal use, 850, Ck. No. 2008. Required 1. Record the owners name in the Capital and Drawing T accounts. 2. Correctly place the plus and minus signs for each T account and label the debit and credit sides of the accounts. 3. Record the transactions in T accounts. Write the letter of each entry to identify the transaction. 4. Foot the T accounts and show the balances. 5. Prepare a trial balance, with a three-line heading, dated November 30, 20--.arrow_forwardDuring December of this year, G. Elden established Ginnys Gym. The following asset, liability, and owners equity accounts are included in the chart of accounts: During December, the following transactions occurred: a. Elden deposited 35,000 in a bank account in the name of the business. b. Bought exercise equipment for cash, 8,150, Ck. No. 1001. c. Bought advertising on account from Hazel Company, 105. d. Bought a display rack on account from Cyber Core, 790. e. Bought office equipment on account from Office Aids, 185. f. Elden invested her exercise equipment with a fair market value of 1,200 in the business. g. Made a payment to Cyber Core, 200, Ck. No. 1002. h. Sold services for the month of December for cash, 800. Required 1. Write the account classifications (Assets, Liabilities, Capital, Drawing, Revenue, Expense) in the fundamental accounting equation, as well as the plus and minus signs and Debit and Credit. 2. Write the account names on the T accounts under the classifications, place the plus and minus signs for each T account, and label the debit and credit sides of the T accounts 3. Record the amounts in the proper positions in the T accounts. Write the letter next to each entry to identify the transaction. 4. Foot and balance the accounts.arrow_forwardA business has the following transactions: The business is started by receiving cash from an investor in exchange for common stock $20,000 The business purchases supplies on account $500 The business purchases furniture on account $2,000 The business renders services to various clients on account totaling $9,000 The business pays salaries $2,000 The business pays this months rent $3,000 The business pays for the supplies purchased on account. The business collects from one of its clients for services rendered earlier in the month $1,500. What is total income for the month?arrow_forward
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