Question

Thrifty Tax Services, Inc. was organized in 2017 to provide tax and accounting services to small businesses. The following are balance sheet values as of January 1, 2018: Cash $ 1,400 Accounts receivable 750 Supplies 210 Equipment 8,200 Patent 5,900 Accounts payable 600 Notes payable -0- Common Stock 2,000 Additional Paid in Capital 12,000 Retained earnings 1,860 Total $16,460 $16,460 Consider the following transactions that occurred during January 2018: Sold 1,000 shares of $1 par value stock for $10 per share to investors. Borrowed $7,500 from a local bank signing a promissory note due at the end of two years. Purchased miscellaneous supplies on account for $350. Billed a client $2,000 for tax preparation services. Paid a $650 bill from the local newspaper for advertising for the month of January. The ad appeared in the paper during January. Received $500 from the client billed in entry (d). Received cash of $1,400 for services provided in preparing a client’s tax return. Purchased computer equipment for $4,000 in cash. Paid $1,650 in salaries and wages for January. Received and paid $700 for utilities. Required 1. Enter beginning balances in T-accounts. 2. Prepare journal entries for each transaction. 3. Post the entries to the T-accounts. Key your entries with the transaction letters used here. 4. Prepare a classified balance sheet for the month ended January 31, 2018. The ending balance in Retained Earnings as of January 31, 2018 (after closing entries) is $2,260.

Answer 1

Journal Entries :

Serial	Accounts Titles	Debit $	Credit $
a	Cash	10000
	CS		1000
	Additional paid in Capital		9000
b	Cash	7500
	Note payable		7500
c	Supplies	350
	AP		350
d	AR	2000
	Sales revenue		2000
e	Advertising expense	650
	Cash		650
f	Cash	500
	AR		500
g	Cash	1400
	Sales revenue		1400
h	Equipment	4000
	Cash		4000
i	Salary & Wages exp	1650
	Cash		1650
j	Utilities expenses	700
	Cash		700

T-Accounts :

T-Accounts:
DEBIT	AMOUNT $	CREDIT	AMOUNT $
Cash a/c
OB	1400	e	650
a	10000	h	4000
b	7500	i	1650
f	500	j	700
g	1400	CB	13800
AR a/c
OB	750	f	500
d	2000	CB	2250
Supplies a/c
OB	210	CB	560
c	350
Equipment a/c
OB	8200	CB	12200
h	4000
Patent a/c
OB	5900
AP a/c
CB	950	OB	600
		c	350
NP a/c
		b	7500
CS a/c
CB	3000	OB	2000
		a	1000
Additional Paid in Capital a/c
CB	21000	OB	12000
		a	9000
RE a/c
CB	2260	OB	1860
		NP	400
Sales Rev a/c
CB	3400	d	2000
		g	1400
Advertising exp. a/c
e	650
Salary & Wage exp a/c
i	1650
Utilities exp a/c
j	700

Balance Sheet :

Assets	amount $	Liabilities	amount $
Cash	13800	AP	950
AR	2250	NP	7500
Supplies	560	CS	3000
Equipment	12200	APIC	21000
Patent	5900	RE	2260
Total	34710	Total	34710