Question

Karla Tanner opens a Web consulting business called Linkworks and completed the following transactions in its first month of operations.

Apri1 1 Tanner invested $105,000 cash along with office equipment valued at $25,200 in the company.

2 The company prepaid $7,200 cash for 12 months' rent for office space. Hint t Debit Prepaid Rent for $7,200.

3 The company made credit purchases for $12,600 in office equipment and $2,520 in office supplies. Payment is due within 10 days.

6 The company completed services for a client and immediately received $2,000 cash.

9 The company completed a $8,400 project for a client, who must pay within 30 days.

13 The company paid $15,120 cash to settle the account payable created on April 3 .

19 The company paid $6,000 cash for the premium on a 12 -month insurance policy. Hint: Debit Prepaid Insurance fo $6,000 .

22 The company received $6,720 cash as partial payment for the work completed on April 9.

25 The company completed work for another client for $2,640 on credit.

28 Tanner withdrew $6,200 cash from the company for personal use.

29 The company purchased $840 of additional office supplies on credit.

30 The company paid $700 cash for this month's utility bill.

Required:

1. Prepare general journal entries to record these transactions using the following titles: Cash (101); Accounts Receivable (106); Office Supplies (124); Prepaid Insurance (128); Prepaid Rent (131); Office Equipment (163); Accounts Payable (201); K. Tanner, Capital (301); K. Tanner, Withdrawals (302); Services Revenue (403); and Utilities Expense (690).

2. Post the journal entries from part 1 to the ledger accounts.

3. Prepare a trial balance as of April 30 .

Answer 1

1. Answer -

Date	Account title	Debit	Credit
Apr. 01	Cash	$105000
	Office equipment	$25200
	K. Tanner, capital ($105000 + $25200)		$130200
Apr. 02	Prepaid rent	$7200
	Cash		$7200
Apr. 03	Office equipment	$12600
	Office supplies	$2520
	Accounts payable ($12600 + $2520)		$15120
Apr. 06	Cash	$2000
	Services revenue		$2000
Apr. 09	Accounts receivable	$8400
	Services revenue		$8400
Apr. 13	Accounts payable	$15120
	Cash		$15120
Apr. 19	Prepaid insurance	$6000
	Cash		$6000
Apr. 22	Cash	$6720
	Accounts receivable		$6720
Apr. 25	Accounts receivable	$2640
	Services revenue		$2640
Apr. 28	K. Tanner, withdrawals	$6200
	Cash		$6200
Apr. 29	Office supplies	$840
	Accounts payable		$840
Apr. 30	Utilities expense	$700
	Cash		$700

2. Answer -

Cash (101)
Date	Debit	Credit	Balance
Apr. 01	$105000		$105000
Apr. 02		$7200	$97800
Apr. 06	$2000		$99800
Apr. 13		$15120	$84680
Apr. 19		$6000	$78680
Apr. 22	$6720		$85400
Apr. 28		$6200	$79200
Apr. 30		$700	$78500

Calculation:

April 30 (Ending balance):

= $105000 - $7200 + $2000 - $15120 - $6000 + $6720 - $6200 - $700

= $78500

Accounts receivable (106)
Date	Debit	Credit	Balance
Apr. 09	$8400		$8400
Apr. 22		$6720	$1680
Apr. 25	$2640		$4320
Apr. 30			$4320

Calculation:

April 30 (Ending balance):

= $8400 - $6720 + $2640

= $4320

Office supplies (124)
Date	Debit	Credit	Balance
Apr. 03	$2520		$2520
Apr. 29	$840		$3360
Apr. 30			$3360

Calculation:

April 30 (Ending balance):

= $2520 + $840

= $3360

Prepaid insurance (128)
Date	Debit	Credit	Balance
Apr. 19	$6000		$6000
Apr. 30			$6000

Prepaid rent (131)
Date	Debit	Credit	Balance
Apr. 02	$7200		$7200
Apr. 30			$7200

Office equipment (163)
Date	Debit	Credit	Balance
Apr. 01	$25200		$25200
Apr. 03	$12600		$37800
Apr. 30			$37800

Calculation:

April 30 (Ending balance):

= $25200 + $12600

= $37800

Accounts payable (201)
Date	Debit	Credit	Balance
Apr. 03		$15120	$15120
Apr. 13	$15120		$0
Apr. 29		$840	$840

Calculation:

April 30 (Ending balance):

= $15120 - $15120 + $840

= $840

K. Tanner, capital (301)
Date	Debit	Credit	Balance
Apr. 01		$130200	$130200
Apr. 30			$130200

K. Tanner, withdrawals (302)
Date	Debit	Credit	Balance
Apr. 28	$6200		$6200
Apr. 30			$6200

Services revenue (403)
Date	Debit	Credit	Balance
Apr. 06		$2000	$2000
Apr. 09		$8400	$10400
Apr. 25		$2640	$13040
Apr. 30			$13040

Calculation:

April 30 (Ending balance):

= $2000 + $8400 + $2640

= $13040

Utilities expense (690)
Date	Debit	Credit	Balance
Apr. 30	$700		$700

3. Answer -

Linkworks
Trial Balance
As of April 30
	Debit	Credit
Cash	$78500
Accounts receivable	$4320
Office supplies	$3360
Prepaid insurance	$6000
Prepaid rent	$7200
Office equipment	$37800
Accounts payable		$840
K. Tanner, capital		$130200
K. Tanner, withdrawals	$6200
Services revenue		$13040
Utility expense	$700
Total	$144080	$144080

Note: For ending balances of accounts such as Cash, Accounts receivable, Office supplies, Prepaid insurance, Prepaid rent, Office equipment, Accounts payable, K. Tanner, capital, K. Tanner, Withdrawals, Services revenue and Utilities expense referred T-accounts balance on April 30.