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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881

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BuyFindarrow_forward

Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
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Problem 2-62B Comprehensive Problem

Mulberry Services sells electronic data processing services to firms too Email to own their own computing equipment. Mulberry had the following amounts and amount balances as of January 1, 2019:

Chapter 2, Problem 62APSA, Problem 2-62B Comprehensive Problem Mulberry Services sells electronic data processing services to

During 2019, the following transactions occurred (the events described below are aggregations of many individual events):

  1. During 2019, Mulberry sold $690,000 of computing services, all on credit.
  2. Mulberry collected $570,000 from the credit sales in Transaction a and an additional $129,000 from the accounts receivable outstanding at the beginning of the year.
  3. Mulberry paid the interest payable of $8,000.
  4. A Wages of $379,000 were paid in cash.
  5. Repairs and maintenance of $9,000 were incurred and paid.
  6. The prepaid rent at the beginning of the year was used in 2019. In addition, $28,000 of computer rental costs were incurred and paid. There is no prepaid rent or rent payable at year-end.
  7. Mulberry purchased computer paper for $13,000 cash in late December. None of the paper was used by year-end.
  8. Advertising expense of $26,000 was incurred and paid.
  9. Income tax of $10,300 was incurred and paid in 2019.
  10. Interest of $5,000 was paid on the long-term loan.

(Continued)

Required:

  1. Establish a T-account for the accounts listed above and enter the beginning balances. Use a chart of accounts to order the T-accounts.
  2. Analyze each transaction; Journalize as appropriate. (Note: Ignore the date because these events are aggregations of individual events.)
  3. Post your journal entries to the T-accounts. Add additional T-accounts when needed.
  4. Use the ending balances in the T-accounts to prepare a trial balance.

To determine

T-Accounts:

T-accounts as its name derived from shape of the account, is representation of business transaction in their respective account. It helps in organizing and analyzing the transaction according to their similar nature of account.

Requirement 1

Prepare:

Prepare ledger accounts and enter the beginning balances.

Explanation
    NatureAccounts NameNormal BalanceDebitCredit
    Asset CashDebitIncrease Decrease
    Accounts ReceivableDebitIncreaseDecrease
    Liabilities Accounts PayableCredit DecreaseIncrease
    Interest PayableCredit
To determine

Journal Entries:

Journal entries are medium of recording business transactions. A business enterprise must record all the business transaction to evaluate net income or loss and analyze the financial performance of a company during a specified accounting period.

Requirement 2

To Prepare:

Prepare journal entries for the transaction during 2019.

To determine

Introduction:

T-accounts as its name derived from shape of the account, is representation of business transaction in their respective account. It helps in organizing and analyzing the transaction according to their similar nature of account.

Requirement 3

Prepare:

Posting the journal entries to T-accounts.

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 4

Prepare:

Prepare the trial balance as of December 31, 2019.

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