Question

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

April 1 Tanner invested $115,000 cash along with office equipment valued at $27,600 n the company in exchange for common stock.

  2 The company prepaid $7,200 cash for 12 months’ rent for office space. (Hint: Debit Prepaid Rent for $7,200.)

  3 The company made credit purchases for $13,800 in office equipment and $2,760 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 $9,200 project for a client, who must pay within 30 days.

  13 The company paid $16,560 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 for $6,000.)

  22 The company received $7,360 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 The company paid $6,200 cash in dividends.

   29 The company purchased $920 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); Common Stock (307); Dividends (319); 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)

Journal Entries:

1)
Date	Accounts Titles and Explanations	Debit	Credit
Apr. 1	Cash	$115,000
	Office Equipment	$27,600
	Common Stock ($115,000 + $27,600)		$142,600
	(To record the issue of common stock in exchange for cash and equipment)
Apr. 2	Prepaid Rent	$7,200
	Cash		$7,200
	(To record the prepayment of 12 months rent by cash)
Apr. 3	Office Equipment	$13,800
	Office Supplies	$2,760
	Accounts Payable		$16,560
	(To record the purchase of office equipment and supplies on account)
Apr. 6	Cash	$2,000
	Service Revenue		$2,000
	(To record the providing of services on cash)
Apr. 9	Accounts Receivable	$9,200
	Service Revenue		$9,200
	(To record the providing of services on account)
Apr. 13	Accounts Payable	$16,560
	Cash		$16,560
	(To record the settlement of accounts payable)
Apr. 19	Prepaid Insurance	$6,000
	Cash		$6,000
	(To record the prepayment of 12 months insurance by cash)
Apr. 22	Cash	$7,360
	Accounts Receivable		$7,360
	(To record the partial receipt of cash from credit customers)
Apr. 25	Accounts Receivable	$2,640
	Service Revenue		$2,640
	(To record the providing of services on account)
Apr. 28	Dividends	$6,200
	Cash		$6,200
	(To record the payment of dividends by cash)
Apr. 29	Office Supplies	$920
	Accounts Payable		$920
	(To record the purchase of office supplies on account)
Apr. 30	Utilities Expense	$700
	Cash		$700
	(To record the payment of utility bill)

2)

Posting of Journals to Ledger Accounts:

2) Apr.1 Beg. Bal. Apr. 1 Apr. 6 Apr. 22 Cash (101) S0 Apr. 2 $7,200 $115.000 Apr. 13 $16,560 $2,000 Apr. 19 $6,000 $7,360 Apr. 28 $6,200 Apr. 30 $700 Apr. 30 End. Bal. $87,700 $124.360 $124.360 $7,360 Accounts Receivable (106) Apr. 1 Beg. Bal. $0 Apr. 22 Apr. 9 $9,200 Apr. 25 $2.640 Apr. 30 End. Bal. $11.840 $4,480 $11.840 Office Supplies (124) $0 Apr.1 Beg. Bal. Apr. 3 Apr. 29 $2.760 $920 Apr. 30 End. Bal. $3.680 $3,680 $3.680

Apr.1 Beg. Bal. Apr. 19 Prepaid Insurance (128) SO $6,000 Apr. 30 End. Bal. $6.000 $6,000 $6.000 Prepaid Rent (131) SO Apr. 1 Beg. Bal. Apr. 2 $7,200 Apr. 30 End. Bal. $7.200 $7,200 $7,200 Office Equipment (163) $0 Apr.1 Beg. Bal. Apr. 1 Apr. 3 $27.600 $13,800 Apr. 30 End. Bal. $41,400 $41,400 $41.400 SO Accounts Payable (201) Apr. 13 $16,560 Apr.1 Beg. Bal. Apr. 3 Apr. 3 Apr. 30 End. Bal. $920 Apr. 29 $17.480 $13,800 $2,760 $920 $17.480

SO Common Stock (307) Apr.1 Beg. Bal. Apr. 1 Apr. 30 End. Bal. $142,600 Apr. 1 $142.600 $115,000 $27,600 $142.600 Dividends (319) 56,200 Apr. 30 Apr. 28 $6,200 Service Revenue (403) Apr. 6 |Apr. 9 $13,840 Apr. 25 $13.840 $2,000 $9,200 $2,640 $13,840 Apr. 30 Utilities Expense (690) $700 Apr. 30 Apr. 30 $700

c)

Trial Balance:

Karla Tanner
Trial Balance
April. 30
	Debit	Credit
Cash	$87,700
Accounts Receivable	$4,480
Office Supplies	$3,680
Prepaid Insurance	$6,000
Prepaid Rent	$7,200
Office Equipment	$41,400
Accounts Payable		$920
Common Stock		$142,600
Dividends	$6,200
Service Revenue		$13,840
Utilities Expense	$700
Totals	$157,360	$157,360

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