Question

In: Accounting

Morrison Accounting Services was organized on June 2 by a group of accountants to provide accounting...

Morrison Accounting Services was organized on June 2 by a group of accountants to provide accounting and tax services to small businesses. The following transactions occurred during the first month of business:

June 2

Received contributions of $10,000 from each of the three owners of the business in exchange for shares of stock. (Capital Stock)

June 5

Purchased a computer system for $12,000. The agreement with the vendor requires a down payment of $2,500 with the balance due in 60 days. (Computer; Cash; Accounts Payable)

June 8

Signed a two-year promissory note (Note Payable) at the bank and received cash of $20,000.

June 15

Billed $12,350 to clients for the first half of June. Clients are billed twice a month for services performed during the month, and the bills are payable within ten days. (Accounts Receivable; Service Revenue)

June 17

Paid a $900 bill from the local newspaper for advertising for the month of June. (Advertising Expense)

June 23

Received the amounts billed to clients for services performed during the first half of the month.

June 28

Received and paid gas, electric, and water bills (Utilities Expense). The total amount is $2,700.

June 29

Received the landlord’s bill for $2,200 for rent on the office space the Morrison leases. The bill is payable by the 10th of the following month. (Rent Expense; Rent Payable)

June 30

Paid salaries and wages for June. (Salaries Expense) The total amount is $5,670.

June 30

Billed $18,400 to clients for the second half of June.

June 30

Declared and paid dividends in the amount of $6,000. (Dividends)

Prepare journal entries on the books of Morrison Accounting Services to record the transactions entered into during the month. Ignore depreciation expense and interest expense (we’ll get to that later in the semester.)

Prepare a trial balance in good form at June 30. List the accounts in the following order: assets, liabilities, owners’ equity, revenue, expenses, dividends. (You will find it helpful to set-up and post to T-accounts; the T-accounts are not required to be turned in for grading.)

Prepare the following financial statements in good form:

Income statement for the month of June

Statement of retained earnings for the month of June

Classified balance sheet at June 30.

Solutions

Expert Solution

1) Journal
Date Account Titles and Explanations Debit Credit
June 2 Cash ($10,000 x 3) $30,000.00
Capital Stock $30,000.00
Issued capital stock for cash
June 5 Computer $12,000.00
Cash $2,500.00
Accounts Payable $9,500.00
Purchased computer with down payment; balance due in 60 days
June 8 Cash $20,000.00
Notes Payable $20,000.00
Signed two-year promissory note at bank
June 15 Accounts Receivable $12,350.00
Service Revenue $12,350.00
Billed customers for services rendered in first half of month balance due in 10 days.
June 17 Advertising Expense $900.00
Cash $900.00
Paid for June advertising.
June 23 Cash $12,350.00
Accounts Receivables $12,350.00
Received amounts due from customers
June 28 Utility Expense $2,700.00
Cash $2,700.00
Paid gas, electric, and water bills
June 29 Rent Expense $2,200.00
Rent Payable $2,200.00
Received bill for June rent to be paid by July 10
June 30 Salaries Expense $5,670.00
Cash $5,670.00
Paid June salaries and wages.
June 30 Accounts Receivable $18,400.00
Service Revenue $18,400.00
Billed customers for services rendered during the second half of June.
June 30 Dividends $6,000.00
Cash $6,000.00
Declared and paid dividends.
2)
MORRISON ACCOUNTING
TRIAL BALANCE
Jun 30, 20XX
Dr. Cr.
Cash $ $44,580.00
Accounts Receivable $18,400.00
Computer $12,000.00
Accounts Payable $9,500.00
Notes Payable $20,000.00
Rent Payable $2,200.00
Capital Stock $30,000.00
Service Revenue $30,750.00
Advertising Expense $900.00
Utility Expense $2,700.00
Rent Expense $2,200.00
Salaries and Wages Expense $5,670.00
Dividends $6,000.00
Totals $92,450.00 $92,450.00

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