In October, their fifth month of operation, the following transactions took plac

Question

In October, their fifth month of operation, the following transactions took place:

Oct.    

1          $1,200 cash was paid for inventory supplies

1          Rented a storage facility and paid $1,200 for 12 months rent in advance

2          Customer paid cash of $3,500 for services performed.

3          Made first payment on loan to Dunham.

5          Collected $2,300 from customer billed in the previous month.

7          Paid cash for telephone bill $320 and utility bill of $310.

15        Paid cash for labor (employees) $2,500.

18        Paid cash for payroll taxes at a rate of 22%.

19        Paid for previous month's invoices in the amount of $3,100.

21        Billed customer $2,800 for services performed.

26        Paid $900 for gas reimbursement to owners.

30        Paid cash for labor (employees) $2,700.

31        Customer paid cash of $6,500 for services performed.

In addition, the following additional facts are collected

a- Another month of rent has expired.

b- Payroll taxes of 22% for the October 31th payroll were paid on November 15, 2010.

c- Supplies inventory balance at October 31 was $1,525.

d- The equipment purchased on September 2 is expected to have a useful life of 4 years and no salvage value. (use straight line depreciation)

e- On October 31, Drillmakers Inc. was paid $1,300 in advance for services.

Required/Question :

     1- Record journal entries for all transactions listed above for the month of October.Post your journal entries to t-accounts (use the ending balance sheet balances from September as your beginning balances in October).

Explanation / Answer

(A) Journal entries :

Oct 1 . supplies Account Dr. $1200

To cash Account Dr. $1200

(Being cash paid to supplies)

Oct 1. prepaid rent Account Dr. $1200

To cash Dr. $1200

(Being Prepaid rent for 12 months)

Oct 2 Cash Account Dr. $3500

To Service income $3500

(Being cash received from customer)

Oct5 Cash Account Dr. 2300

To Accounts Receivable $2300

(Being cash received from debtor of last month)

   Oct7 Telephone Expenses Dr. $320

   utilitiesExpenses Dr. $310

   To Cash $630

( being cash payment to telephone and utilities)

  Oct 15 Labour Expenses Dr. $2500

   To cash $1950

   To Tax $550

(Being cash payment after deducting payroll tax)

Oct 19 Creditors Dr. $3100

To cash $3100

( Being last month invoice paid )

Oct21 Accounts receivable Dr. $2800

   To service income $2800

(Being bill issued for cash collection)

Oct 26 Owner Dr. $900

To cash $900

(being cash reimbursement to owner)

Cot 30 labour Expenses Dr. $2700

To cash $2106

  To Tax $594

(Being cash payment after deducting tax)

Oct 31 Cash Dr. $6500   

To Service income $6500

(Being cash collected from customer )

Oct 31 Closing stock Dr. $1525

To supplies $1525

(Being closing stock of supplies recorded)

Oct 31 Cash Dr.$1300

To prepaid service income $1300

(Being prepaid income received for service rendered recorded)

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