Question

Creative Designs, a firm providing art services for advertisers, began business on June 1. The following accounts in its general ledger are needed to record the transactions for June: Cash; Accounts Receivable; Supplies; Office Equipment; Accounts Payable; Common Stock; Dividends; Service Fees Earned; Rent Expense; Utilities Expense; and Salaries Expense. a. Using the accounting equation, record each of the transactions in columnar format. b. Use journal entries to record the following transactions for June in the general journal. June 1 Lisa Ryan invested $22,000 cash to begin the business; she received common stock for her investment. 2 Paid rent for June, $1,950. 3 Purchased office equipment on account, $7,400. 6 Purchased art materials and other supplies costing $4,800; paid $2,800 down with the remainder due within 30 days. 11 Billed clients for services, $10,000. 17 Collected $4,250 from clients on account. 19 Paid $4,000 on account to office equipment company (see June 3 transaction). 25 Lisa Ryan received a $3,000 dividend. 30 Paid utility bill for June, $1,350. 30 Paid salaries for June, $3,500.

Answer 1

SOLUTION

A. Using accounting equation-

Date	Cash	+	Accounts receivable	+	Supplies	+	Office equipment	=	Accounts payable	+	Common stock	+	Retained earnings
Jun1	22,000										22,000
Jun2	(450)												(450)
Jun3							7,400		7,400
Jun6	(2,800)				4,800				2,000
Jun11			10,000										10,000
Jun17	4,250		(4,250)
Jun19	(4,000)								(4,000)
Jun25	3,000												3,000
Jun30	(1,350)												(1,350)
Jun30	(3,500)												(3,500)
Total	17,150		5,750		4,800		7,400		5,400		22,000		7,700

B. Journal entries-

Date	Accounts titles and Explanation	Debit ($)	Credit ($)
June 1	Cash	22,000
	Common stock		22,000
June 2	Rent expense	1,950
	Cash		1,950
June 3	Office equipment	7,400
	Accounts payable		7,400
June 6	Supplies	4,800
	Cash		2,800
	Accounts payable		2,000
June 11	Accounts receivable	10,000
	Service revenue		10,000
June 17	Cash	4,250
	Accounts receivable		4,250
June 19	Accounts payable	4,000
	Cash		4,000
June 25	Cash	3,000
	Dividend		3,000
June 30	Utility expense	1,350
	Cash		1,350
June 30	Salary expense	3,500
	Cash		3,500