Question

In: Accounting

Elaine Consulting incorporated on February 1, current year. The company engaged in the following transactions during...

Elaine Consulting incorporated on February 1, current year. The company engaged in the following transactions during its first month of operations.

Feb. 1 Issued capital stock in exchange for $800,000 cash.
Feb. 5 Borrowed $100,000 from the bank by issuing a note payable.
Feb. 8 Purchased land, building, and office equipment for $750,000. The value of the land was $150,000, the value of the building was $540,000, and the value of the office equipment was $60,000. The company paid $200,000 cash and issued a note payable for the balance.
Feb. 11 Purchased office supplies for $800 on account. The supplies will last for several months.
Feb. 14 Paid the local newspaper $500 for a full-page advertisement. The ad will appear in print on February 18.
Feb. 20 Several of the inkjet printer cartridges that Elaine purchased on February 11 were defective. The cartridges were returned and the office supply store reduced Elaine’s outstanding balance by $200.
Feb. 22 Performed consulting services for $14,000 cash.
Feb. 24 Billed clients $16,000.
Feb. 25 Paid salaries of $12,000.
Feb. 28 Paid the entire outstanding balance owed for office supplies purchased on February 11.

A partial list of the account titles used by the company includes the following

Cash Notes Payable
Accounts Receivable Accounts Payable
Office Supplies Capital Stock
Land Client Service Revenue
Building Advertising Expense
Office Equipment Salaries Expense

a. Prepare journal entries for the above transactions.

b. Post each entry to the appropriate ledger accounts.

c. Prepare a trial balance dated February 28, current year. Assume accounts with zero balances are not included in the trial balance.

Solutions

Expert Solution

Date Particulars Debit Credit
1-Feb Cash $ 800,000.00
Capital $ 800,000.00
(to reocrd cash rceived in business)
5-Feb Cash $ 100,000.00
Notes Payable $ 100,000.00
(to record cash received through borrowings)
8-Feb Land $ 150,000.00
Building $ 540,000.00
Office Equipment $    60,000.00
Cash $ 200,000.00
Notes Payable $ 550,000.00
(to record purchase of fixed assets)
11-Feb Office supplies $          800.00
Accounts Payable $          800.00
14-Feb Adv Exp $          500.00
Cash $          500.00
( to record office expenses)
20-Feb Accounts Payable $          200.00
Office supplies $          200.00
(to record retuned office supplies)
22-Feb Cash $    14,000.00
Revenue $    14,000.00
24-Feb Accounts Receivable $    16,000.00
Revenue $    16,000.00
25-Feb Salary $    12,000.00
Cash $    12,000.00
28-Feb Accounts Payable $          600.00
Cash $          600.00
TRIAL BALANCE
Particulars Debit Credit
Cash $      700,900.00
Accounts Receivable $        16,000.00
Office Supplies $              600.00
Land $      150,000.00
Building $      540,000.00
Office equipment $        60,000.00
Notes payable $      650,000.00
Capital $      800,000.00
Revenue $        30,000.00
Adv $              500.00
Salary $        12,000.00
Accounts Payable $                       -  
$ 1,480,000.00 $ 1,480,000.00

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