Question

At June 30, 2017, the end of its most recent fiscal year, Blue Computer Consultants’ post-closing trial balance was as follows:

		Debit		Credit
Cash		$6,380
Accounts receivable		1,460
Supplies		840
Accounts payable				$490
Unearned service revenue				1,370
Common stock				4,400
Retained earnings				2,420
		$8,680		$8,680

The company underwent a major expansion in July. New staff was hired and more financing was obtained. Blue conducted the following transactions during July 2017, and adjusts its accounts monthly.

July	1		Purchased equipment, paying $4,400 cash and signing a 2-year note payable for $24,400. The equipment has a 4-year useful life. The note has a 6% interest rate which is payable on the first day of each following month.
	2		Issued 24,400 shares of common stock for $61,000 cash.
	3		Paid $4,200 cash for a 12-month insurance policy effective July 1.
	3		Paid the first 2 (July and August 2017) months’ rent for an annual lease of office space for $4,900 per month.
	6		Paid $4,600 for supplies.
	9		Visited client offices and agreed on the terms of a consulting project. Blue will bill the client, Connor Productions, on the 20th of each month for services performed.
	10		Collected $1,460 cash on account from Milani Brothers. This client was billed in June when Blue performed the service.
	13		Performed services for Fitzgerald Enterprises. This client paid $1,370 in advance last month. All services relating to this payment are now completed.
	14		Paid $490 cash for a utility bill. This related to June utilities that were accrued at the end of June.
	16		Met with a new client, Thunder Bay Technologies. Received $14,600 cash in advance for future services to be performed.
	18		Paid semi-monthly salaries for $13,400.
	20		Performed services worth $34,200 on account and billed customers.
	20		Received a bill for $2,700 for advertising services received during July. The amount is not due until August 15.
	23		Performed the first phase of the project for Thunder Bay Technologies. Recognized $12,200 of revenue from the cash advance received July 16.
	27		Received $18,300 cash from customers billed on July 20.

Adjustment data:

1.		Adjustment of prepaid insurance.
2.		Adjustment of prepaid rent.
3.		Supplies used, $1,550.
4.		Equipment depreciation, $600 per month.
5.		Accrual of interest on note payable.
6.		Salaries for the second half of July, $13,400, to be paid on August 1.
7.		Estimated utilities expense for July, $980 (invoice will be received in August).
8.		Income tax for July, $1,460, will be paid in August.

The chart of accounts for Blue Computer Consultants contains the following accounts: Cash, Accounts Receivable, Supplies, Prepaid Insurance. Prepaid Rent, Equipment, Accumulated Depreciation—Equipment, Accounts Payable, Notes Payable, Interest Payable, Income Taxes Payable, Salaries and Wages Payable, Unearned Service Revenue, Common Stock, Retained Earnings, Dividends, Income Summary, Service Revenue, Supplies Expense, Depreciation Expense, Insurance Expense, Salaries and Wages Expense, Advertising Expense, Income Tax Expense, Interest Expense, Rent Expense, Supplies Expense, and Utilities Expense.

Journalize the July transactions. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. Record journal entries in the order presented in the problem. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Answer 1

Solution

Blue Computer Consultants

Journal entries for the month of July:

Date	Account Titles and Explanation		Debit	Credit
1-Jul	Equipment		$28,800
	Cash			$4,400
	Notes Payable			$24,400
	(To record purchase of equipment, partly with cash and partly signing notes payable)
2-Jul	Cash		$61,000
	Common Stock			$61,000
	(To record issue of 24,400 shares of common stock)
3-Jul	Prepaid Insurance		$4,200
	Cash			$4,200
	(To record payment of prepaid insurance)
3-Jul	Prepaid Rent		$9,800
	Cash			$9,800
	(To record prepaid rent for two months – 4,900 x 2 =$9,800)
6-Jul	Supplies		$4,600
	Cash			$4,600
	(To record supplies bought)
9-Jul	No Entry
10-Jul	Cash		$1,460
	Accounts Receivable			$1,460
	(To record collections from customers billed previously)
13-Jul	Unearned Revenue		$1,370
	Service Revenue			$1,370
	(To record recognition of unearned revenue on services performed)
14-Jul	Utilities Payable		$490
	Cash			$490
	(To record payment of June utility bill)
16-Jul	Cash		$14,600
	Unearned Revenue			$14,600
	(To record advance received from client for services to be performed)
18-Jul	Salaries Expense		$13,400
	Cash			$!3,400
	(To record payment of semi-monthly salaries)
20-Jul	Accounts Receivable		$34,200
	Service Revenue			$34,200
	(To record services rendered on account)
20-Jul	Advertising Expense		$2,700
	Advertising Payable			$2,700
	(To record advertising bill due)
23-Jul	Unearned Revenue		$12,200
	Service Revenue			$12,200
	(To record recognition of revenue of the advance received on July 16)
27-Jul	Cash		$18,300
	Accounts Receivable			$18,300
	(To record collections from customers)
Adjusting Entries -
31-Jul	Insurance Expense		$350
	Prepaid Insurance			$350
	(To record insurance expense for July - 4,200 x 1/12 = $350)
31-Jul	Rent Expense		$4,900
	Prepaid Rent			$4,900
	(To record rent expense for July, 9,800/2 = $4,900)
31 Jul	Supplies Expense		$1,550
	Supplies			$1,550
	(To record cost of supplies used)
31-Jul	Depreciation Expense – Equipment		$600
	Accumulated Depreciation - Equipment			$600
	(To record depreciation expense on equipment)
31 Jul	Interest Expense		$122
	Interest Payable			$122
	(To record interest expense on notes payable - 6% x 24,400 x 1/12 = $122)
31-Jul	Salaries Expense		$13,400
	Salaries Payable			$13,400
	(To record salaries expense due for second half of July)
31-Jul	Utilities Expense		$980
	Utilities Payable			$980
	(To record utilities expense due but unpaid)
31-Jul	Income Tax Expense		$1,460
	Income Tax Payable			$1,460
	(To record income tax expense due but unpaid)