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Cornerstones of Financial Accounti...

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Jay Rich + 1 other
ISBN: 9781337690881

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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
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Problem 2-56A Analyzing Transactions

Luis Madero, after working for several years with a large public accounting firm decided to open his own accounting service. The business is operated as a corporation under the name Madero Accounting Services. The following captions and amounts summarize Madero’s balance sheet at July 31, 2019.

Chapter 2, Problem 56APSA, Problem 2-56A Analyzing Transactions Luis Madero, after working for several years with a large

The following events occurred during August 2019.

  1. Issued common stock to Ms. Garriz in exchange for $15,000 cash.
  2. Paid $850 for first month’s rent on office space.
  3. Purchased supplies of $2,250 on credit.
  4. Borrowed $8,000 from the bank.
  5. Paid $1,080 on account for supplies purchased earlier on credit.
  6. Paid secretary’s salary for August of $2,150.
  7. Performed amounting services for clients who paid cash upon completion of the service in the total amount of $4,700.
  8. Used $3,180 of the supplies on hand.
  9. Perfumed accounting services for clients on credit in the total amount of $1,920.
  10. Purchased $500 in supplies for cash.
  11. Collected $1,290 cash from clients for whom services were performed on credit.
  12. Paid $1,000 dividend to stockholders.

Required:

  1. Record the effects of the transactions listed above on the accounting equation. Use the format given in the problem, starting with the totals at July 31, 20l9.
  2. Prepare the trial balance at August 31, 2019.

To determine

Trial Balance:

A financial statement which integrates all the balance of ledger accounts is termed as a trial balance. The total balance of debit and credit in trial balance should be equal at end of an accounting period.

Requirement 2

Prepare the trial balance at August 31, 2019.

Explanation
    Madero Accounting Services
    Trial Balance
    August 31, 2019
    Account TitleDebit Credit
    Cash$31,410
    Accounts Receivable16,530
    Supplies3,670
    Accounts Payable $3,670
    Notes Payable12,000
    Common Stock27,000
    Retained Earnings9,500
    Dividends1,000
    Revenue6,620

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