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Horngren'S Financial And Managerial Accounting
Found in: Page 109

Short Answer

Journalizing transactions, posting journal entries to four-column accounts, and preparing a trial balance

Theodore McMahon opened a law office on April 1, 2018. During the first month of operations, the business completed the following transactions:

Apr. 1 McMahon contributed $70,000 cash to the business, Theodore McMahon, Attorney. The business issued common stock to McMahon.

3 Purchased office supplies, $1,100, and furniture, $1,300, on account.

4 Performed legal services for a client and received $2,000 cash.

7 Purchased a building with a market value of $150,000, and land with a market value of $30,000. The business paid $40,000 cash and signed a note payable to the bank for the remaining amount.

11 Prepared legal documents for a client on account, $400.

15 Paid assistant’s semi monthly salary, $1,200.

16 Paid for the office supplies purchased on April 3 on account. 18 Received $2,700 cash for helping a client sell real estate.

19 Defended a client in court and billed the client for $1,700.

25 Received a bill for utilities, $650. The bill will be paid next month.

28 Received cash on account, $1,100.

29 Paid $3,600 cash for a 12-month insurance policy starting on May 1.

29 Paid assistant’s semi monthly salary, $1,200.

30 Paid monthly rent expense, $2,100.

30 Paid cash dividends of $3,200.

Requirements 4. Prepare the trial balance of Theodore McMahon, Attorney, at April 30, 2018.

Common stock is the stock that shows ownership of the business and the required trial balance is prepared.

See the step by step solution

Step by Step Solution

Step 1: Definition of common stock

The common stock is defined as the financial instrument representing the company's ownership.

Step 2: Preparing a trial balance

Terrence Murphy

Trial Balance

January 18, 2018

Account Title

Debit ($)

Credit ($)

Cash

$23,700

Accounts Receivables

$1,000

Office Supplies

$1,100

Prepaid Insurance

$3,600

Land

$30,000

Building

$150,000

Furniture

$1,300

Accounts Payable

$3,500

Utilities Payable

$650

Notes Payable

$140,000

Common Stock

$70,000

Dividends

$3,200

Service Revenue

$6,800

Salaries Expense

$2,400

Rent Expense

$2,100

Utilities Expense

$650

Total

$220,950

$220,950

Most popular questions for Business-studies Textbooks

Journalizing transactions, posting journal entries to four-column accounts, and preparing a trial balance

The trial balance of Shawn Merry, CPA, is dated March 31, 2018: During April, the business completed the following transactions:

Cash 11,000

Office Supplies 400

Accounts Receivable 16,500

Land 30,000

Furniture 0

Automobile 0

Accounts Payable 3,800

Unearned Revenue 0

Common Stock 52,300

Dividends 0

Rent Expense 800

Salaries Expense 5,600

Service Revenue 8,200

Total Balance $ 64,300 64,300

During April, the business completed the following transactions:

Apr. 4 Collected $2,500 cash from a client on account.

8 Performed tax services for a client on account, $5,400.

13 Paid $3,000 on account.

14 Purchased furniture on account, $3,600.

15 Merry contributed his personal automobile to the business in exchange for common stock. The automobile had a market value of $9,500.

18 Purchased office supplies on account, $900.

19 Received $2,700 for tax services performed on April 8.

20 Paid cash dividends of $6,500.

21 Received $5,700 cash for consulting work completed.

24 Received $2,400 cash for accounting services to be completed next month.

27 Paid office rent, $600.

28 Paid employee salary, $1,700.

Requirements

2. Open the four-column ledger accounts listed in the trial balance, together with their balances as of March 31. Use the following account numbers: Cash, 11; Accounts Receivable, 12; Office Supplies, 13; Land, 14; Furniture, 15; Automobile, 16; Accounts Payable, 21; Unearned Revenue, 22; Common Stock, 31; Dividends, 33; Service Revenue, 41; Salaries Expense, 51; and Rent Expense, 52

Journalizing transactions, posting to T-accounts, and preparing a trial balance

Consider the following transactional data for the first month of operations for Crystal Clear Cleaning.

Nov. 1 Stockholders contributed $15,000 and a truck, with a market value of $3,000, to the business in exchange for common stock.

2 The business paid $4,000 to Pleasant Properties for November through February rent. (Debit Prepaid Rent)

3 Paid $4,800 for a business insurance policy for the term November 1, 2018 through October 31, 2019. (Debit Prepaid Insurance)

4 Purchased cleaning supplies on account, $320.

5 Purchased on account an industrial vacuum cleaner costing $1,500. The invoice is payable November 25.

7 Paid $3,900 for a computer and printer.

9 Performed cleaning services on account in the amount of $4,700.

10 Received $200 for services rendered on November 9. 15 Paid employees, $400.

16 Received $15,000 for a 1-year contract beginning November

16 for cleaning services to be provided. Contract begins November 16, 2018, and ends November 15, 2019. (Credit Unearned Revenue)

17 Provided cleaning services and received $400 cash.

18 Received a utility bill for $175 with a due date of December 4, 2018. (Use Accounts Payable)

20 Borrowed $36,000 from bank with interest rate of 6% per year.

21 Received $500 on account for services performed on November 9.

25 Paid $750 on account for vacuum cleaner purchased on November 5.

29 Paid $200 for advertising.

30 Cash dividends of $1,400 were paid to stockholders

3. Post the journal entries to the T-accounts, and calculate account balances

Journalizing transactions, posting to T-accounts, and preparing a trial balance

Problem P2-42 continues with the company introduced in Chapter 1, Canyon Canoe Company. Here you will account for Canyon Canoe Company’s transactions as it is actually done in practice. Begin by reviewing the transactions from Chapter 1. The transactions have been reprinted below.

Nov. 1 Received $16,000 cash to begin the company and issued common stock to Amber and Zach.

2 Signed a lease for a building and paid $1,200 for the first month’s rent.

3 Purchased canoes for $4,800 on account.

4 Purchased office supplies on account, $750.

7 Earned $1,400 cash for rental of canoes.

13 Paid $1,500 cash for wages.

15 Paid $50 dividends to stockholders.

16 Received a bill for $150 for utilities. (Use separate payable account.)

20 Received a bill for $175 for cell phone expenses. (Use separate payable account.)

22 Rented canoes to Early Start Daycare on account, $3,000.

26 Paid $1,000 on account related to the November 3 purchase.

28 Received $750 from Early Start Daycare for canoe rental on November 22.

30 Paid $100 dividends to stockholders

In addition, Canyon Canoe Company completed the following transactions for December.

Dec. 1 Amber and Zack contributed land on the river (worth $85,000) and a small building to use as a rental office (worth $35,000) in exchange for common stock.

1 Prepaid $3,000 for three months’ rent on the warehouse where the company stores the canoes.

2 Purchased canoes signing a note payable for $7,200

4 Purchased office supplies on account for $500.

9 Received $4,500 cash for canoe rentals to customers.

15 Rented canoes to customers for $3,500, but will be paid next month.

16 Received a $750 deposit from a canoe rental group that will use the canoes next month.

18 Paid the utilities and telephone bills from last month.

19 Paid various accounts payable, $2,000.

20 Received bills for the telephone ($325) and utilities ($295) which will be paid later.

31 Paid wages of $1,800. 31 Paid cash dividend to stockholders, $300.

Requirements

1. Journalize the transactions for both November and December, using the following accounts: Cash; Accounts Receivable; Office Supplies; Prepaid Rent; Land; Building; Canoes; Accounts Payable; Utilities Payable; Telephone Payable; Unearned Revenue; Notes Payable; Common Stock; Dividends; Canoe Rental Revenue; Rent Expense; Utilities Expense; Wages Expense; and Telephone Expense. Explanations are not required. (Hint: For November transactions, refer to your answer for Chapter 1.)

2. Open a T-account for each of the accounts.

3. Post the journal entries to the T-accounts, and calculate account balances. Formal posting references are not required.

4. Prepare a trial balance as of December 31, 2018.

5. Prepare the income statement of Canyon Canoe Company for the two months ended December 31, 2018.

6. Prepare the statement of retained earnings for the two months ended December 31, 2018.

7. Prepare the balance sheet as of December 31, 2018.

8. Calculate the debt ratio for Canyon Canoe Company at December 31, 2018

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