Chapter 2 Journal Entries Maria Sanchez Maria Sanchez start to be recorded. ed a

Question

Chapter 2 Journal Entries Maria Sanchez Maria Sanchez start to be recorded. ed a consulting firm at the first of May. The following transactions need May ers invested $15,000 cash in the business in exchange for common stock. Borrowed $5,000 form the bank on a note payable. office equipment for $2,000 paying $200 in cash and the balance on acct 2 Paid $700 for office rent for the month 3 Purchased $500 supplies on account s Paid $150 to advertise in the County News 9 Received $1,000 cash for services provided. 12 Paid $200 cash dividend 15 Performed $4,200 of services on account. 17 Paid $2,500 for employee salaries 20 Paid for the supplies purchased on account on May 3 23 Received a cash payment of $1,500 for services provided on account on May 15. 30 Paid $150 for utilties 2. Prepare the T-Accounts to record the transactions 3. Make the following adjusting journal entries a. Prepaid rent has been used b. Office equipment will last 5 years with no salvage value. C. The note payable has an interest rate of 6%. d. Supplies on hand were $200 at the end of the month] the adjusting journal entries into the T-Accounts and make an adjusted trial balance. 5. Prepare the financial statements

Explanation / Answer

1 Journal entries for May Date Account Titles Debit Credit 1-May Cash $15,000 Common Stock $15,000 1-May Cash $5,000 Note Payable $5,000 1-May Office Equipment $2,000 Cash $200 Accounts payable $1,800 2-May Prepaid Rent $700 Cash $700 3-May Supplies $500 Accounts Payable $500 5-May Advertisement expense $150 Cash $150 9-May Cash $1,000 Service Revenue $1,000 12-May Dividend paid $200 Cash $200 15-May Accounts receivable $4,200 Service Revenue $4,200 17-May Salaries expense $2,500 Cash $2,500 20-May Accounts Payable $500 Cash $500 23-May Cash $1,500 Accounts receivable $1,500 30-May Utilities expense $150 Cash $150 3 Adjusting Entries 30-May Rent Expense $700 Prepaid Rent $700 30-May Depreciation expense $400 Accumulated Depreciation-Equipment $400 ($2000/5 = $400) 30-May Interest expense $25 Interest payable $25 ($5000 x 6% x 1/12 = $25) 30-May Supplies expense $300 Supplies $300 4 Adjusted Trial Balance Account titles Debit Credit Cash $18,100 Accounts receivable $2,700 Supplies $200 Office Equipment $2,000 Accumulated Depreciation-equipment $400 Accounts payable $1,800 Interest payable $25 Note Payable $5,000 Common Stock $15,000 Dividend Paid $200 Service Revenue $5,200 Advertisement Expense $150 Rent Expense $700 Salaries Expense $2,500 Depreciation Expense $400 Utilities Expense $150 Supplies Expense $300 Interest expense $25 Total $27,425 $27,425 5 Financial Statements Income Statement Service Revenue $5,200 Less: Operating Expenses Advertisement Expense $150 Rent Expense $700 Salaries Expense $2,500 Depreciation Expense $400 Utilities Expense $150 Supplies Expense $300 Total Operating Expenses $4,200 Operating Profit $1,000 Non-operating expenses Interest expense $25 Net Profit $975 Balance Sheet Assets Amount Current Assets: Cash $18,100 Accounts receivable $2,700 Supplies $200 Total Current Assets $21,000 Fixed Assets: Office Equipment $2,000 Accumulated Depreciation-Equipment ($400) $1,600 Total Assets $22,600 Liabilities Current Liabilities: Accounts payable $1,800 Interest payable $25 Total Current liabilities $1,825 Non-current liabilities: Note Payable $5,000 Equity: Common Stock $15,000 Retained Earnings $775 Total Equity $15,775 Total Liabilities and Equity $22,600 2 T-accounts to record the transactions Cash Common Stock 1-May $15,000 1-May $200 1-May $15,000 1-May $5,000 2-May $700 9-May $1,000 5-May $150 23-May $1,500 12-May $200 17-May $2,500 Note Payable 20-May $500 1-May $5,000 30-May $150 30-May $18,100 Office Equipment Accounts Payable 1-May $2,000 20-May $500 1-May $1,800 3-May $500 Prepaid Rent Supplies 2-May $700 30-May $700 3-May $500 30-May $300 30-May $200 Advertisement Expense Service Revenue 5-May $150 9-May $1,000 15-May $4,200 Dividend Paid Accounts receivable 12-May $200 15-May $4,200 23-May $1,500 30-May $2,700 Salaries Expense Utilities expense 17-May $2,500 30-May $150 Rent Expense Depreciation Expense 30-May $700 30-May $400 Accumulated Depreciation-Equipment Interest Expense 30-May $400 30-May $25 Interest Payable Supplies Expense 30-May $25 30-May $300

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