Chapter 3, Problem 13AP

a

To determine

Prepare the necessary journal entries and post to the ledger accounts.

Explanation of Solution

Journal entry: Journal entry is a set of economic events which can be measured in monetary terms. These are recorded chronologically and systematically.

Prepare the journal entries in the books of Corporation B.

Date	Account titles and Explanation	Debit ($)	Credit ($)
December  1	Cash (A+)	35,000
	Common stock (E+)		35,000
	(To record the issuance of common stock)
December  2	Rent expenses (E-)	1,200
	Cash(A-)		1,200
	(To record  the rent expense)
December  3	Advertising  expense (E-)	750
	Accounts payable (L+)		750
	(To record the purchase of T-shirt on account)
December  4	Accounts payable (L-)	750
	Cash (A-)		750
	(To record the accounts payable)
December  5	Cash (A+)	4,500
	Wanted ad revenue (E+)		4,500
	(To record the wanted ad revenue)
December  6	Delivery expense (E-)	910
	Cash (A-)		910
	(To record the delivery expense)
December  7	Accounts receivable (A+)	5,600
	Advertising revenue (E+)		5,600
	(To record the advertising revenue)
December  8	Delivery expense (E-)	50
	Cash (A-)		50
	(To record the delivery expense)
December  9	Printing expense(E-)	2,900
	Cash (A-)		2,900
	(To record the printing expense)
December  10	Cash (A+)	2,570
	Wanted Ad revenue (E+)		2,570
	(To record the wanted Ad revenue)
December  11	Utilities expense (E-)	610
	Accounts payable (L+)		610
	(To record the utilities expense)
December  12	Printing expense (E-)	2,900
	Cash (A-)		2,900
	(To record the printing expense)
December  13	Salaries expense (E-)	4,100
	Cash(A-)		4,100
	(To record the salaries expense)
December 14	Accounts receivable (A+)	8,850
	Advertising revenue (E+)		8,850
	(To record the advertising revenue)
December 15	Delivery expense (E-)	930
	Cash (A-)		930
	(To record the delivery expense for bulk mailing)
December 16	Delivery expense (E-)	350
	Cash (A-)		350
	(To record the delivery expense for courier service)
December 17	Cash(A+)	5,100
	Accounts receivable (A-)		5,100
	(To record the collection of accounts receivable)
December 18	Office equipment (A+)	1,400
	Notes payable(L+)		1,400
	(To record the purchase of office equipment)

Table (1)

T-account:

T-account is the form of the ledger account, where the journal entries are posted to this account. It is referred to as the T-account, because the alignment of the components of the account resembles the capital letter ‘T’.

The components of the T-account are as follows:

a) The title of the account

b) The left or debit side

c) The right or credit side

Prepare the T-accounts:

b.

To determine

Prepare an unadjusted trial balance as of 30th December.

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.

Prepare the trial balance as of 31st December.

Company B
Trial Balance
December 31
Accounts	Debit ($)	Credit ($)
Cash	33,080
Accounts receivable	9,350
Office equipment	1,400
Printing  Expense	5,800
Advertising expense	750
Utilities expense	610
Salaries expense	4,100
Rent expense	1,200
Delivery expense	2,240
Advertising revenue		14,450
Wanted AD Revenue		7,070
Notes payable		1,400
Accounts payable		610
Common stock		35,000
Total	58,350	58,350

Table (2)

Conclusion

The debit column and credit column of the trial balance are agreed, both having balance of $58,530

c.

To determine

Prepare the income statement for the month of December.

Explanation of Solution

Income statement: The financial statement which reports revenues and expenses from business operations and the result of those operations as net income or net loss for a particular time period is referred to as income statement.

Prepare an income statement for the year ended December 31.

Company B Income statement For the year ended December 31
Details	Amount ($)	Amount ($)
Revenues:
Advertising revenue	14,450
Wanted Ad revenue	7,070
Total revenue		21520
Less: Expenses
Printing  Expense	5,800
Advertising expense	750
utilities expense	610
Salaries expense	4,100
Rent expense	1,200
Delivery expense	2,240
Total Expenses		(14,700)
Net Income		6,820

Table (2)

d.

To determine

Prepare the balance sheet as of December 31.

Explanation of Solution

Balance sheet: This financial statement reports a company’s resources (assets) and claims of creditors (liabilities) and stockholders (stockholders’ equity) over those resources. The resources of the company are assets which include money contributed by stockholders and creditors. Hence, the main elements of the balance sheet are assets, liabilities, and stockholders’ equity.

Prepare a balance sheet of Company B.

Company B Balance Sheet As on December 31
ASSETS	Amount($)	Amount($)
Current Assets:
Cash	33,080
Account receivable	9,350
Total Current Assets		42,430
Office Equipment		1,400
Total Assets		43,830
LIABILITIES
Accounts payable	610
Notes payable	1,400
Total liabilities		2,010
Stockholders’ equity
Common stock	35,000
Retained earnings	6,820
Total Stockholders’ Equity		41,820
Total Liabilities and Stockholders’ Equity		43,830

Table (4)