Question

Decision Problem 1
Your friend, Amin Akmali, has asked your advice about the effects that certain business
transactions will have on his business. His business, Car Finders, finds the best deals on
automobiles for clients. Time is short, so you cannot journalize transactions. Instead, you
must analyze the transactions and post them directly to T-accounts. Akmali will continue in
the business only if he can expect to earn monthly net income of $8,000. The business had
the following transactions during March 2017:
a. Akmali deposited $50,000 cash in a business bank account.
b. The business borrowed $8,000 cash from the bank, which is recorded as a note payable
due within one year.
c. Purchased for cash a vehicle to drive clients to appointments, $27,000.
d. Paid $1,600 cash for supplies.
e. Paid cash for advertising in the local newspaper, $1,200.
f. Paid the following cash expenses for one month: commission, $12,400; office rent, $800;
utilities, $600; gas, $1,000; interest, $200.
g. Earned revenue on account, $20,600.
h. Earned $7,500 revenue and received cash.
i. Collected cash from customers on account, $2,400.
Required
1. Open the following T-accounts: Cash; Accounts Receivable; Supplies; Vehicle; Notes
Payable; Amin Akmali, Capital; Advising Revenue; Advertising Expense; Interest
Expense; Rent Expense; Commission Expense; Gas Expense; Utilities Expense.
2. Record the transactions directly in the T-accounts without using a journal. Identify each
transaction by its letter.
3. Prepare an unadjusted trial balance at March 31, 2017. List expenses alphabetically.
4. Compute the amount of net income or net loss for this first month of operations. Would
you recommend Akmali continue in business?

Answer 1