John’s House Painting Company has the following transactions for the year 1. Dec
ID: 2452685 • Letter: J
Question
John’s House Painting Company has the following transactions for the year
1. December 1 – Issued capital stock for $100,000 to start a house painting business.
2. December 1 - Paid gas expense $500.
3. December 1 - Paid one year insurance premium costing $3,600.
4. December 1 - Received $3,000 for a job to paint a house in January next year.
5. December 1 - Painted three houses totaling $15,000 and billed customers.
6. December 1 - Purchased equipment costing $8,400 on credit.
7. December 12 - Purchased supplies costing $900 on credit.
8. December 23 - Painted three rooms and billed customers $1,500.
9. December 31 - Paid for equipment purchased in #6.
10. December 28 - Received $2,000 for houses painted in #5.
11. December 31 - Paid a $2,000 dividend.
1. Prepare journal entries for the above transactions.
2. Post the above transactions to T Accounts.
3. Prepare a Trial Balance.
4. Prepare adjusting entries in journal format and post to T Accounts.
Supplies on Hand December 31 was $400.
The Equipment is to be depreciated over 48 months starting with December. (HINT; Record one month depreciation expense).
Wages owed but not paid on December 31 was $600.
One month of insurance has expired.
5. Prepare an Adjusted Trial Balance.
Explanation / Answer
Sr No/ Date
Account Titles
Debit
Credit
1/ Dec 1
Cash
100,000
Capital Stock
100,000
To record the issue of capital stock
2/ Dec 1
Gas Expense
500
Cash
500
To record payment of gas expense
3/ Dec 1
Prepaid Insurance
3,600
Cash
3,600
To record the payment for insurance
4/ Dec 1
Cash
3,000
Unearned Revenue
3,000
To record the receipt of advance for painting work
5 / Dec1
Accounts Receivable
15,000
Revenue
15,000
To record the issuance of bill towards painting work
6 / Dec1
Equipment
8,400
Accounts Payable
8,400
To record the purchase of equipment on credit
7 / Dec 12
Supplies
900
Accounts Payable
900
To record the purchase of supplies
8/ Dec 23
Accounts Receivable
15,00
Revenue
15,00
To record the issuance of bill towards painting work
9/ Dec 31
Accounts Payable
8,400
Cash
8,400
To record the payment of creditors of equipment
10/ Dec 31
Cash
2,000
Accounts Receivable
2,000
To record the receipt of payment from customers.
11/ Dec 31
Retained Earnings
2,000
Cash
2,000
To record the payment of dividends.
(‘2) Posting of Journals in T Accounts
Cash
No
Debit
Credit
No
(1)
(4)
(10)
100,000
3,000
2,000
500
3,600
8,400
2,000
(2)
(3)
(9)
(11)
105,000
14,500
90,500
Capital Stock
No
Debit
Credit
No
100,000
(1)
100,000
100,000
Gas Expense
No
Debit
Credit
No
(2)
500
500
500
Prepaid Insurance
No
Debit
Credit
No
(3)
3,600
3600
3600
Revenue
No
Debit
Credit
No
15,000
1,500
(5)
(8)
16,500
16,500
Unearned Revenue
No
Debit
Credit
No
3,000
(4)
3000
3000
Accounts Receivable
No
Debit
Credit
No
(5)
(8)
15,000
1,500
2,000
(10)
16,500
2000
14,500
Accounts Payable
No
Debit
Credit
No
(9)
8,400
8,400
9,00
(6)
(7)
900
900
Equipment
No
Debit
Credit
No
(6)
8,400
Supplies
No
Debit
Credit
No
(7)
900
500
(12)
900
500
400
Retained Earnings
No
Debit
Credit
No
(11)
2,000
Supplies Expense
No
Debit
Credit
No
(12)
500
500
500
Depreciation
No
Debit
Credit
No
(13)
175
175
175
Accumulated Depreciation
No
Debit
Credit
No
175
(13)
175
175
Wages Expense
No
Debit
Credit
No
(14)
600
600
600
Wages Payable
No
Debit
Credit
No
600
(14)
600
600
Insurance Expense
No
Debit
Credit
No
(15)
300
300
300
(‘3) Trial Balance
Accounts Details
Debit
Credit
Gas Expense
500
Revenue
16,500
Cash
90,500
Equipment
8,400
Unearned Revenue
3,000
Supplies
900
Accounts Receivable
14,500
Accounts Payable
900
Prepaid Insurance
3600
Retained Earnings
2000
Capital Stock
100,000
Total
120,400
120,400
(‘4) Adjusting entries
Sr No
Account Titles
Debit
Credit
12
Supplies Expense
500
Supplies ( 900-400)
500
To record the usage of supplies at the year end
13
Depreciation
(8400/48 x 1)
175
Accumulated Depreciation
175
To record the depreciation on equipment
14
Wages Expense
600
Wages Payable
600
To record the wages for the month.
15
Insurance Expense
300
Prepaid Insurance
300
To record the insurance expense for the year as per accrual basis.
(‘5) Adjusted Trial Balance
Accounts Details
Unadjusted Trial Balance
Adjusting Entries
Adjusted Trial Balance
Gas Expense
500
500
Revenue
(16,500)
(16,500)
Supplies Expense
0
500
500
Depreciation Expense
0
175
175
Wages Expense
0
600
600
Insurance Expense
0
300
300
Cash
90,500
90,500
Equipment Less Depreciation
8,400
(175)
8,225
Unearned Revenue
(3,000)
(3000)
Supplies
900
(500)
400
Wages Payable
0
(600)
(600)
Accounts Receivable
14,500
14,500
Accounts Payable
(900)
(900)
Prepaid Insurance
3600
(300)
3,300
Retained Earnings
2000
2000
Capital Stock
(100,000)
(100,000)
Total
0
0
Note- (1) Figures in brackets shows credit balance of accounts.
Sr No/ Date
Account Titles
Debit
Credit
1/ Dec 1
Cash
100,000
Capital Stock
100,000
To record the issue of capital stock
2/ Dec 1
Gas Expense
500
Cash
500
To record payment of gas expense
3/ Dec 1
Prepaid Insurance
3,600
Cash
3,600
To record the payment for insurance
4/ Dec 1
Cash
3,000
Unearned Revenue
3,000
To record the receipt of advance for painting work
5 / Dec1
Accounts Receivable
15,000
Revenue
15,000
To record the issuance of bill towards painting work
6 / Dec1
Equipment
8,400
Accounts Payable
8,400
To record the purchase of equipment on credit
7 / Dec 12
Supplies
900
Accounts Payable
900
To record the purchase of supplies
8/ Dec 23
Accounts Receivable
15,00
Revenue
15,00
To record the issuance of bill towards painting work
9/ Dec 31
Accounts Payable
8,400
Cash
8,400
To record the payment of creditors of equipment
10/ Dec 31
Cash
2,000
Accounts Receivable
2,000
To record the receipt of payment from customers.
11/ Dec 31
Retained Earnings
2,000
Cash
2,000
To record the payment of dividends.
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