Byron & Rees CPAs decided to open its own tax practice, Easy Taxes, Inc. The fol

Question

Byron & Rees CPAs decided to open its own tax practice, Easy Taxes, Inc. The following transactions are the events that occured during May, the company's first month:

1. Byron and Rees each donated $40,000 cash in exchange for common stock. They also signed a note with Western Bank for $50,000.

2. Easy Taxes paid $25,000 prepaid rent for the first year.

3. Office equipment was purchased on account for $12,500

4. The company purchased insurance for two years with $6,000 cash. The policy was effective June 1

5. A discolored piece of office equipment arrived and the supplier agreed to remove $500 from Easy Taxes' account.

6. The company purchased some office furniture on sale worth $20,000 on account.

7. Easy Taxes paid off the balance owed on equipment.

8. An office manager was hired at a rate of $125 a day. The start date is June 1.

Requirement 1: Give the journal entry for each transaction. Post the entries to T-accounts. Prepare an unadjusted trial balance. Begin by giving the journal entry for each transaction. Record debits first then credits. Explanations should appear on the last line of the entry if no entry is required simpe write "No Entry"

Explanation / Answer

Journal Entry Date Particulars Dr. Amt. Cr. Amt. 1.a. Cash                                                          Dr.    80,000.00    To Common Stock    80,000.00 1.b. Cash                                                          Dr.    40,000.00    To Notes Payable    40,000.00 2 Prepaid Rent                                         Dr.    25,000.00    To Cash    25,000.00 3 Office Equipment                               Dr.    12,500.00    To Accounts Payable    12,500.00 4 Prepaid Insurance                              Dr.      6,000.00    To Cash      6,000.00 5 Accounts Payable                              Dr.          500.00    To Office Equipment          500.00 6 Office Furniture                                Dr.    20,000.00    To Accounts Payable    20,000.00 7 Accounts Payable                            Dr.    12,000.00    To Cash    12,000.00 8 No Entry For Hiring for Manager Cash Common Stock Beg. Bal.                   -   Beg. Bal.                   -   1.a.    80,000.00    25,000.00 2    80,000.00 1.b. 1.b.    40,000.00      6,000.00 4    12,000.00 7 End. Bal.    77,000.00 End. Bal.    80,000.00 Prepaid rent Office Equipment Beg. Bal.                   -   Beg. Bal.                   -            500.00 5 2    25,000.00 3    12,500.00 End. Bal.    25,000.00 End. Bal.    12,000.00 Accounts Payable Prepaid Insurance Beg. Bal.                   -   Beg. Bal.                   -   5          500.00    12,500.00 3 4      6,000.00 7    12,000.00    20,000.00 6 End. Bal.    20,000.00 End. Bal.      6,000.00 Office Furniture Notes Payables Beg. Bal.                   -   Beg. Bal.                   -   6    20,000.00    40,000.00 1.b. End. Bal.    20,000.00 End. Bal.    40,000.00 Unadjusted Trial Balance Particulars Dr. Amt. Cr. Amt. Cash           77,000.00 Common Stock        80,000.00 Prepaid rent           25,000.00 Office Equipment           12,000.00 Accounts Payable        20,000.00 Prepaid Insurance             6,000.00 Office Furniture           20,000.00 Notes Payables        40,000.00 Total         140,000.00      140,000.00

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