Question

Karla Tanner opened a Web consulting business called Linkworks and completed the following transactions in its first month of operations.
  

April		1		Tanner invested $100,000 cash along with office equipment valued at $24,000 in the company in exchange for common stock.
		2		The company prepaid $7,200 cash for 12 months’ rent for office space. Hint: Debit Prepaid Rent for $7,200.
		3		The company made credit purchases for $12,000 in office equipment and $2,400 in office supplies. Payment is due within 10 days.
		6		The company completed services for a client and immediately received $2,000 cash.
		9		The company completed a $8,000 project for a client, who must pay within 30 days.
		13		The company paid $14,400 cash to settle the account payable created on April 3.
		19		The company paid $6,000 cash for the premium on a 12-month insurance policy. Hint: Debit Prepaid Insurance for $6,000.
		22		The company received $6,400 cash as partial payment for the work completed on April 9.
		25		The company completed work for another client for $2,640 on credit.
		28		The company paid a $6,200 cash dividend.
		29		The company purchased $800 of additional office supplies on credit.
		30		The company paid $700 cash for this month’s utility bill.

  
Required:
1. Prepare general journal entries to record these transactions using the following titles: Cash (101); Accounts Receivable (106); Office Supplies (124); Prepaid Insurance (128); Prepaid Rent (131); Office Equipment (163); Accounts Payable (201); Common Stock (307); Dividends (319); Services Revenue (403); and Utilities Expense (690).
2. Post the journal entries from part 1 to the ledger accounts.
3. Prepare a trial balance as of April 30.

Answer 1

Answer:

1. Preparing General Journal to record the Transactions:-

Lineworks

General Journal

For the Month of April

Date	Accounts	Debit	Credit
April 1	Cash	$100,000
	Office Equipment	$24,000
	Common Stock		$124,000
April 2	Prepaid Rent	$7,200
	Cash		$7,200
April 3	Office Equipment	$12,000
	Office Supplies	$2,400
	Accounts Payable		$14,400
April 6	Cash	$2,000
	Service Revenue		$2,000
April 9	Accounts Receivable	$8,000
	Service Revenue		$8,000
April 13	Accounts Payable	$14,400
	Cash		$14,400
April 19	Prepaid Insurance	$6,000
	Cash		$6,000
April 22	Cash	$6,400
	Accounts Receivable		$6,400
April 25	Accounts Receivable	$2,640
	Service Revenue		$2,640
April 28	Dividends	$6,200
	Cash		$6,200
April 29	Office Supplies	$800
	Accounts Payable		$800
April 30	Utilities Expense	$700
	Cash		$700

2. Opening the Ledger Accounts:-

Cash (101)

Date	Debit	Credit	Balance
April 1	$100,000		$100,000
2		$7,200	$92,800
6	$2,000		$94,800
13		$14,400	$80,400
19		$6,000	$74,400
22	$6,400		$80,800
28		$6,200	$74,600
30		$700	$73,900

Accounts Receivable (106)

Date	Debit	Credit	Balance
April 9	$8,000		$8,000
22		$6,400	$1,600
25	$2,640		$4,240

Office Supplies (124)

Date	Debit	Credit	Balance
April 3	$2,400		$2,400
29	$800		$3,200

Prepaid Insurance (128)

Date	Debit	Credit	Balance
April 19	$6,000		$6,000

Prepaid Rent (131)

Date	Debit	Credit	Balance
April 2	$7,200		$7,200

Office Equipment (163)

Date	Debit	Credit	Balance
April 1	$24,000		$24,000
3	$12,000		$36,000

Accounts Payable (201)

Date	Debit	Credit	Balance
April 3		$14,400	$14,400
13	$14,400		$0
29		$800	$800

Common Stock (307)

Date	Debit	Credit	Balance
April 1		$124,000	$124,000

Dividends (319)

Date	Debit	Credit	Balance
April 28	$6,200		$6,200

Service Revenue (403)

Date	Debit	Credit	Balance
April 6		$2,000	$2,000
9		$8,000	$10,000
25		$2,640	$12,640

Utilities Expense (690)

Date	Debit	Credit	Balance
April 30	$700		$700

3. Preparing a Trial Balance as of April 30.

Lineworks

Trial Balance

As of April 30

No.	Accounts	Debit	Credit
101	Cash	$73,900
106	Accounts Receivable	4,240
124	Office Supplies	3,200
128	Prepaid Insurance	6,000
131	Prepaid Rent	7,200
163	Office Equipment	36,000
201	Accounts Payable		$800
307	Common Stock		124,000
319	Dividends	6,200
403	Service Revenue		12,640
690	Utilities Expense	700
	Totals	$137,440	$137,440