Question

Ⓡ a Search P2-3B Richardson Services Ltd. was formed on May 1, 2017. The following transactions took place during the first month. Transactions on May 1: 1. Shareholders invested £50,000 cash in exchange for ordinary shares. 2. Hired two employees to work in the warehouse. They will each be paid a salary of £2,800 per month. 3. Signed a 2-year rental agreement on a warehouse; paid £24,000 cash in advance for the first year. 4. Purchased furniture and equipment costing £30,000. A cash payment of £6,000 was made immediately, the remainder will be paid in 6 months. 5. Paid £1,800 cash for a one-year insurance policy on the furniture and equipment. Transactions during the remainder of the month: 6. Purchased basic office supplies for £940 cash. 7. Purchased more office supplies for £1,300 on account. 8. Total revenues recognized were £18,000-£5,000 cash and £13,000 on account. 9. Paid £400 to suppliers for accounts payable due, 10. Received £3,000 from customers in payment of accounts receivable. 11. Received utility bills in the amount of £260, to be paid next month. 12. Paid the monthly salaries of the two employees, totalling £5,600. Instructions (a) Prepare journal entries to record each of the events listed. (Omit explanations.) (b) Post the journal entries to T-accounts. (c) Prepare a trial balance as of May 31, 2017.

Answer 1

Credit Journal entries Date Particulars 1-May Cash To common shares Debit 50,000 50,000 24,000 1-May Prepaid rent To cash 24,000 30,000 1-May Furniture & equipment To cash To Accounts payable 6,000 24,000 1,800 1-May Prepaid insurance To cash 1,800 940 6-May Office supplies To cash 940 1,300 7-May Office supplies To Accounts payable 1,300

8-May Cash Accounts receivable To Revenue 5,000 13,000 18,000 400 9-May Accounts payable To cash 400 3,000 10-May Cash To Accounts receivable 3,000 11-May Utility expense To Accounts payable 260 5,600 12-May Salary expense To cash 5,600 2,000 (24,000 / 12 months) 31-May Rent expense To Prepaid rent 2,000 150 (1,800 / 12 months) 31-May Insurance expense To Prepaid insurance 150

Particulars To common shares To Revenue To Accounts receivable Cash account Amount Particulars 50,000 By Prepaid rent 5,000 By Furniture & equipment 3,000 By Prepaid insurance By Office supplies By Accounts payable By Salary expense By Closing balance 58,000 Amount 24,000 6,000 1,800 940 400 5,600 19,260 58,000 Particulars To Closing Balance Common shares Amount Particulars 50,000 By Cash 50,000 Amount 50,000 50,000 Particulars To Cash Prepaid Rent Amount Particulars 24,000 By Rent expense By Closing balance 24,000 Amount 2,000 22,000 24,000

Particulars To cash To Accounts payable Furniture & equipment Amount Particulars 6,000 By Closing balance 24,000 30,000 Amount 30,000 30,000 Particulars To Cash Prepaid Insurance Amount Particulars 1,800 Insurance expense By Closing balance 1,800 Amount 150 1,650 1,800 Particulars To cash To Closing Balance Accounts payable Amount Particulars 400 By Furniture & equipment 25,160 By Office supplies By Utility expense 25,560 Amount 24,000 1,300 260 25,560

Amount Particulars To cash To Accounts payable Office Supplies Amount Particulars 940 By Closing balance 1,300 2,240 2,240 2,240 Particulars To Revenue Accounts Receivable Amount Particulars 13,000 By Cash By Closing balance 13,000 Amount 3,000 10,000 13,000

Credit Debit 19,260 10,000 2,240 1,650 22,000 30,000 Trial Balance Accounts Cash Accounts Receivable Office Supplies Prepaid Insurance Prepaid Rent Furniture & Equipment Accounts Payable Common Shares Revenue Salary expense Rent expense Utility expense Insurance expense Total 25,160 50,000 18,000 5,600 2,000 260 150 93,160 93,160