Chapter 4, Problem 1BPSB

To determine

Concept Introduction:

General Ledger:

The accounts use to organize all the transactions of a business organization are termed as general ledger accounts.

Requirement 1:

Apply balance column format to prepare each ledger account.

Answer to Problem 1BPSB

Format of balance column ledger account

Date	Description	Debit	Credit	Balance

Explanation of Solution

The balance column format of ledger account keeps track of balancing amount remaining in the account on each transaction.

To determine

Concept Introduction:

Journal Entries:

Journal entries are medium of recording the financial transactions which occurred during an accounting year.

Requirement 2:

Journalizing the transaction which occurred during July and posting them to the ledger accounts.

Answer to Problem 1BPSB

Accounts	Balance
Cash	$22,850
Accounts Receivable	0
Office Supplies	2,400
Prepaid Insurance	7,200
Buildings	150,000
Accumulated Depreciation - Buildings	0
Salaries Payable	0
L. Plume, Capital	180,000
L. Plume, Withdrawals	2,000
Storage Fees Earned	9,800
Depreciation Expense - Buildings	0
Salaries Expense	2,000
Insurance Expense	0
Rent Expense	2,000
Office Supplies Expense	0
Repairs Expense	950
Telephone Expense	400

Explanation of Solution

Journal Entries

Date	Accounts	Debit	Credit
July
1	Cash	$30,000
	Building	150,000
	L. Plume, Capital		$180,000
2	Rent Expense	2,000
	Cash		2,000
5	Office Supplies	2,400
	Cash		2,400
10	Prepaid Insurance	7,200
	Cash		7,200
14	Salaries Expense	1,000
	Cash		1,000
24	Cash	9,800
	Storage Fees Earned		9,800
28	Salaries Expense	1,000
	Cash		1,000
29	Repair Expense	950
	Cash		950
30	Telephone Expense	400
	Cash		400
31	L. Plume, Withdrawals	2,000
	Cash		2,000

Ledger AccountsCash Account No. 101

Date	Description	Debit	Credit	Balance
July 1	L. Plume, Capital	$30,000		$30,000
2	Rent Expense		$2,000	28,000
5	Office Supplies		2,400	25,600
10	Prepaid Insurance		7,200	18,400
14	Salaries Expense		1,000	17,400
24	Storage Fees Earned	9,800		27,200
28	Salaries Expense		1,000	26,200
29	Repair Expense		950	25,250
30	Telephone Expense		400	24,850
31	L. Plume, Withdrawals		2,000	22,850
July 31	Balance			22,850

Accounts ReceivableAccount No. 106

Date	Description	Debit	Credit	Balance
July 31	Balance			0

Office SuppliesAccount No. 124

Date	Description	Debit	Credit	Balance
July 5	Cash	$2,400		$2,400
July 31	Balance			2,400

Prepaid InsuranceAccount No. 128

Date	Description	Debit	Credit	Balance
July 10	Cash	$7,200		$7,200
July 31	Balance			7,200

BuildingsAccount No. 173

Date	Description	Debit	Credit	Balance
July 1	L. Plume, Capital	$150,000		$150,000
July 31	Balance			150,000

Accumulated Depreciation - Buildings Account No. 174

Date	Description	Debit	Credit	Balance
July 31	Balance			0

Salaries PayableAccount No. 209

Date	Description	Debit	Credit	Balance
July 31	Balance			0

L. Plume, Capital Account No. 301

Date	Description	Debit	Credit	Balance
July 1	Cash	$30,000		$30,000
	Building	150,000		180,000
July 31	Balance			180,000

L. Plume, WithdrawalsAccount No. 302

Date	Description	Debit	Credit	Balance
July 31	Cash	$2,000		$2,000
July 31	Balance			2,000

Storage Fees Earned Account No. 401

Date	Description	Debit	Credit	Balance
July 24	Cash		$9,800	$9,800
July 31	Balance			9,800

Depreciation Expense - Buildings Account No. 606

Date	Description	Debit	Credit	Balance
July 31	Balance			0

Salaries ExpenseAccount No. 622

Date	Description	Debit	Credit	Balance
July 14	Cash	$1,000		$1,000
28	Cash	1,000		2,000
July 31	Balance			2,000

Insurance Expense Account No. 637

Date	Description	Debit	Credit	Balance
July 31	Balance			0

Rent Expense Account No. 640

Date	Description	Debit	Credit	Balance
July 2	Cash	$2,000		$2,000
July 31	Balance			2,000

Office Supplies Expense Account No. 650

Date	Description	Debit	Credit	Balance
July 31	Balance			0

Repairs Expense Account No. 684

Date	Description	Debit	Credit	Balance
July 29	Cash	$950		$950
July 31	Balance			950

Telephone Expense Account No. 688

Date	Description	Debit	Credit	Balance
July 30	Cash	$400		$400
July 31	Balance			400

Income Summary Account No. 901

Date	Description	Debit	Credit	Balance
July 31	Balance			0

To determine

Concept Introduction:

Unadjusted Trial Balance:

Unadjusted trial balance shows the balance of accounts before adjustments required to be made regarding the adjusting entries.

Requirement 3:

To Prepare:

Prepare the unadjusted trial balance as July 31.

Answer to Problem 1BPSB

The total balance of unadjusted trial balance is $189,800.

Explanation of Solution

SAFE STORAGE CO. Unadjusted Trial Balance July 31, 2018
Accounts	Debit	Credit
Cash	$22,850
Accounts Receivable	0
Office Supplies	2,400
Prepaid Insurance	7,200
Buildings	150,000
Accumulated Depreciation - Buildings		0
Salaries Payable		0
L. Plume, Capital		$180,000
L. Plume, Withdrawals	2,000
Storage Fees Earned		9,800
Depreciation Expense - Buildings	0
Salaries Expense	2,000
Insurance Expense	0
Rent Expense	2,000
Office Supplies Expense	0
Repairs Expense	950
Telephone Expense	400
Totals	189,800	189,800

To determine

Concept Introduction:

Adjusting Entries:

The journal entries which shows the expenses and revenue incurred or earned during a particular accounting year are called adjusting entries.

Requirement 4:

Journalizing and posting of adjusting entries for the month.

Answer to Problem 1BPSB

Accounts	Balance
Accounts Receivable	$1,150
Office Supplies	1,525
Prepaid Insurance	6,800
Accumulated Depreciation − Buildings	1,500
Salaries Payable	100
Storage Fees Earned	10,950
Depreciation Expense - Buildings	1,500
Salaries Expense	2,100
Insurance Expense	400
Office Supplies Expense	875

Explanation of Solution

Adjusting Entries and posting of the entries

Date	Accounts	Debit	Credit
July 31
a)	Insurance Expense	$400
	Prepaid Insurance		$400
b)	Office Supplies Expense	875
	Office Supplies		875
c)	Depreciation Expense − Buildings	1,500
	Accumulated Depreciation - Buildings		1,500
d)	Salaries Expense	100
	Salaries Payable		100
e)	Accounts Receivable	1,150
	Storage Fees Earned		1,150

Accounts ReceivableAccount No. 106

Date	Description	Debit	Credit	Balance
July 31	Balance			$0
4(e)	Storage Fees Earned	$1,150		1,150

Office SuppliesAccount No. 124

Date	Description	Debit	Credit	Balance
July 31	Balance			$2,400
4(b)	Office Supplies Expense		$875	1,525

Prepaid InsuranceAccount No. 128

Date	Description	Debit	Credit	Balance
July 31	Balance			$7,200
4(a)	Insurance Expense		$400	6,800

Accumulated Depreciation - Buildings Account No. 174

Date	Description	Debit	Credit	Balance
July 31	Balance			$0
4(c)	Depreciation Expense - Buildings		$1,500	1,500

Salaries PayableAccount No. 209

Date	Description	Debit	Credit	Balance
July 31	Balance			$0
4(d)	Salaries Expense		$100	100

Storage Fees Earned Account No. 401

Date	Description	Debit	Credit	Balance
July 31	Balance			$9,800
4(e)	Accounts Receivable		$1,150	10,950

Depreciation Expense - Buildings Account No. 606

Date	Description	Debit	Credit	Balance
July 31	Balance			$0
4(c)	Accumulated Depreciation - Buildings	$1,500		1,500

Salaries ExpenseAccount No. 622

Date	Description	Debit	Credit	Balance
July 31	Balance			$2,000
4(d)	Salaries Payable	$100		2,100

Insurance Expense Account No. 637

Date	Description	Debit	Credit	Balance
July 31	Balance			$0
4(a)	Prepaid Insurance	$400		400

Office Supplies Expense Account No. 650

Date	Description	Debit	Credit	Balance
July 31	Balance			$0
4(b)	Office Supplies	$875		875

To determine

Concept Introduction:

Adjusted Trial Balance:

Considering all the expenses and revenue occurred irrespective of whether cash is outstanding or received in advance during an accounting period, the adjusted trial balance shows the accurate balances of all the accounts.

Requirement 5

To Prepare:

Prepare adjusted trial balance, income statement, statement of owner's equity and balance sheet at July 31.

Answer to Problem 1BPSB

Particulars	Answers
Total balance of adjusted trial balance	$192,550
Net income	2,725
Owner's equity balance for the July month	180,725
Total balance of assets and liabilities and owner's equity	180,825

Explanation of Solution

Adjusted Trial Balance

SAFE STORAGE CO. Adjusted Trial Balance July 31, 2018
Accounts	Debit	Credit
Cash	$22,850
Accounts Receivable	1,150
Office Supplies	1,525
Prepaid Insurance	6,800
Buildings	150,000
Accumulated Depreciation - Buildings		$1,500
Salaries Payable		100
L. Plume, Capital		180,000
L. Plume, Withdrawals	2,000
Storage Fees Earned		10,950
Depreciation Expense - Buildings	1,500
Salaries Expense	2,100
Insurance Expense	400
Rent Expense	2,000
Office Supplies Expense	875
Repairs Expense	950
Telephone Expense	400
Totals	192,550	192,550

SAFE STORAGE CO.Income Statement July 31, 2018
Revenue:
Storage Fees Earned		$10,950
Expenses:
Depreciation Expense - Buildings	$1,500
Salaries Expense	2,100
Insurance Expense	400
Rent Expense	2,000
Office Supplies Expense	875
Repairs Expense	950
Telephone Expense	400
		8,225
Net Income		$2,725

SAFE STORAGE CO.Statement of Owner's Equity July 31, 2018
L. Plume, Capital; June 30, 2018	$0
Add: Owner Investment during the month	180,000
Net Income	2,725
Subtotal	182,725
Less: L. Plume, Withdrawals	2,000
L. Plume, Capital; July 31, 2018	$180,725

SAFE STORAGE CO.Balance Sheet July 31, 2018
Assets
Current Assets:
Cash	$22,850
Accounts Receivable	1,150
Office Supplies	1,525
Prepaid Insurance	6,800
Total Current Assets		$32,325
Property, Plant and Equipment
Building	150,000
Less: Accumulated Depreciation	1,500	148,500
Total Assets		$180,825
Liabilities and Owner's Equity
Liabilities
Current Liabilities:
Salaries Payable	100
Total Current Liabilities		100
Owner's Equity
L. Plume, Capital; July 31, 2018		180,725
Total Liabilities and Owner's Equity		$180,825

To determine

Concept Introduction:

Closing Entries:

Closing entries intends to close all the temporary accounts and transfer its balances to "income summary account" and then to the owner's capital account. The accounts which are closed at the end of every accounting period are called temporary accounts. Examples: revenue accounts and expenses accounts like salaries, rent, depreciation, insurance, commission expenses, etc.

Requirement 6

To Prepare:

Prepare closing entries to close all the temporary accounts and post them into their concern ledger.

Answer to Problem 1BPSB

Accounts	Balance
Cash	$22,850
Accounts Receivable	1,150
Office Supplies	1,525
Prepaid Insurance	6,800
Buildings	150,000
Accumulated Depreciation − Buildings	1,500
Salaries Payable	100
L. Plume, Capital	180,725
L. Plume, Withdrawals	0
Storage Fees Earned	0
Depreciation Expense − Buildings	0
Salaries Expense	0
Insurance Expense	0
Rent Expense	0
Office Supplies Expense	0
Repairs Expense	0
Telephone Expense	0
Income Summary	0

Explanation of Solution

Journalizing the closing entries and posting into accounts

Date	Accounts	Debit	Credit
July 31
a)	Storage Fees Earned	$10,950
	Income Summary		$10,950
b)	Income Summary	8,225
	Depreciation Expense - Buildings		1,500
	Salaries Expense		2,100
	Insurance Expense		400
	Rent Expense		2,000
	Office Supplies Expense		875
	Repairs Expense		950
	Telephone Expense		400
c)	Income Summary	2,725
	L. Plume, Capital		2,725
d)	L. Plume, Capital	2,000
	L. Plume, Withdrawals		2,000

Storage Fees Earned Account No. 401

Date	Description	Debit	Credit	Balance
July 31	Balance			$10,950
6(a)	Income Summary	10,950		0

Depreciation Expense - Buildings Account No. 606

Date	Description	Debit	Credit	Balance
July 31	Balance			$1,500
6(b)	Income Summary		$1,500	0

Salaries ExpenseAccount No. 622

Date	Description	Debit	Credit	Balance
July 31	Balance			$2,100
6(b)	Income Summary		$2,100	0

Insurance Expense Account No. 637

Date	Description	Debit	Credit	Balance
July 31	Balance			$400
6(b)	Income Summary		$400

Rent Expense Account No. 640

Date	Description	Debit	Credit	Balance
July 31	Balance			$2,000
6(b)	Income Summary		$2,000	0

Office Supplies Expense Account No. 650

Date	Description	Debit	Credit	Balance
July 31	Balance			$875
6(b)	Income Summary		$875	0

Repairs Expense Account No. 684

Date	Description	Debit	Credit	Balance
July 31	Balance			$950
6(b)	Income Summary		$950	0

Telephone Expense Account No. 688

Date	Description	Debit	Credit	Balance
July 31	Balance			$400
6(b)	Income Summary		$400	0

Income Summary Account No. 901

Date	Description	Debit	Credit	Balance
July 31	Balance			$0
6(a)	Storage Fees Earned		$10,950	$10,950
6(b)	Depreciation Expense - Buildings	$1,500		9,450
	Salaries Expense	2,100		7,350
	Insurance Expense	400		6,950
	Rent Expense	2,000		4,950
	Office Supplies Expense	875		4,075
	Repairs Expense	950		3,125
	Telephone Expense	400		2,725
6(c)	L. Plume, Capital	2,725		0

L. Plume, Capital Account No. 301

Date	Description	Debit	Credit	Balance
July 31	Balance			$180,000
6(c)	Income Summary		$2,725	182,725
6(d)	L. Plume, Withdrawals	$2,000		180,725

L. Plume, WithdrawalsAccount No. 302

Date	Description	Debit	Credit	Balance
July 31	Balance			$2,000
6(d)	L. Plume, Capital		$2,000	0

To determine

Concept Introduction:

The trial balance which is prepare after closing all the temporary accounts are termed as post-closing trial balance.

Requirement 7

To Prepare:

Prepare the post-closing trial balance?

Answer to Problem 1BPSB

The total balance of post-closing trial balance is $182,325.

Explanation of Solution

Post-Closing Trial Balance

SAFE STORAGE CO. Adjusted Trial Balance July 31, 2018
Accounts	Debit	Credit
Cash	$22,850
Accounts Receivable	1,150
Office Supplies	1,525
Prepaid Insurance	6,800
Buildings	150,000
Accumulated Depreciation - Buildings		$1,500
Salaries Payable		100
L. Plume, Capital		180,725
L. Plume, Withdrawals	0
Storage Fees Earned		0
Depreciation Expense - Buildings	0
Salaries Expense	0
Insurance Expense	0
Rent Expense	0
Office Supplies Expense	0
Repairs Expense	0
Telephone Expense	0
Income Summary		0
Totals	182,325	182,325