In: Accounting
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.
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 |