Question

Junktrader is an online company that specializes in matching buyers and sellers of used items Buyers and sellers can purchase a membership with Junktrader, which provides them advance notice of potentially attractive offers a. Junktrader provided online advertising services for another company for $315 on account. b. On the last day of the month, Junktrader paid $130 cash to run an ad promoting the company's services. The ad ran that day in the local newspaper. c. Received $230 cash in membership fees for the month from new members d. Received an electricity bill for $135 for usage this month. The bill will be paid next month e Billed a customer $234 for helping sell some junk, Junktrader expects to receive the customer's payment by the end of next month Required: 1. Prepare journal entries for the above transactions, which occurred during a recent month. 2. Determine Junktrader's preliminary net income.

Answer 1

Answer
1
Sr.N	Explanation	Debit	Credit
a	Accounts receivable	$     315
	Advertising revenue		$     315
	(To record advertising services )
b	Advertising expense	$     130
	Cash		$     130
	(To record expenses paid)
c	Cash	$     230
	Membership revenue		$     230
	(To record fees revenue earned)
d	Utilities expense	$     135
	Accounts payable		$     135
	(To record expenses on accrual basis)
e	Accounts receivable	$     234
	Service revenue		$     234
	To record sales revenue earned on account)

2
The preliminary net income is calculated as follows:
JUNK TRADER COMPANY
Income Statement
Revenues:
Service revenue- Advertising	315
Service revenue- Sales	234
Membership fees revenue	230
Total revenue (a)		779
Expenses:
Advertising expense	130
Utilities expense	135
Total expenses (b)		265
Net income (a- b)		514
Therefore, Junktrader's preliminary net income is $514.