Question

Transaction Analysis and Trial Balance Pam Black owns Artsy Graphics, a firm providing designs for advertisers and market analysts. On July 1, the business's general ledger showed the following normal account balances: Cash $6,800 Accounts Payable $2,100 Accounts Receivable 10,700 Notes Payable 4,200 Common Stock 2,000 Retained Earnings 9,200 Total Assets $17,500 Total Liabilities and Stockholders' Equity $17,500 The following transactions occurred during the month of July: 1 Paid July rent, $510. 2 Collected $7,100 on account from customers. 3 Paid $1,800 installment due on the $3,300 noninterest-bearing note payable. 4 Billed customers for design services rendered on account, $18,100. 5 Rendered design services and collected from cash customers, $1,200. 6 Paid $1,400 to creditors on account. 7 Collected $12,750 on account from customers. 8 Paid a delivery service for delivery of graphics to commercial firms, $650. 9 Paid July salaries, $5,300. 10 Received invoice for July advertising expense, to be paid in August, $600. 11 Paid utilities for July, $250. 12 Paid stockholders a dividend of $2,000 cash. 13 Received invoice for supplies used in July, to be paid in August, $2,260. 14 Purchased computer for $7,000 cash to be used in business starting next month. Required: a. Set up accounts for the general ledger with July 1 balances and enter the beginning balances. Also provide the following accounts: Equipment; Service Fees Earned; Rent Expense; Salaries Expense; Delivery Expense; Advertising Expense; Utilities Expense; Supplies Expense; and Dividends. Prepare journal entries and record the listed transactions in the appropriate T-accounts. b. Prepare a trial balance as of July 31.

Answer 1

Requirement a:

General Journal

Ref.	Description	Debit	Credit
1	Rent expense	$510
	Cash		$510
	To record payment of rent expense
2	Cash	$7,100
	Accounts receivable		$7,100
	To record collection form customers
3	Notes payable	$1,800
	Cash		$1,800
	To record payment of notes payable
4	Accounts receivable	$18,100
	Service fees earned		$18,100
	To record customer billings
5	Cash	$1,200
	Service fees earned		$1,200
	To record service fees rendered and collected
6	Accounts payable	$1,400
	Cash		$1,400
	To record payments to creditors
7	Cash	$12,750
	Accounts receivable		$12,750
	To record collections from customers
8	Delivery expense	$650
	Cash		$650
	To record payment of delivery expense
9	Salaries expense	$5,300
	Cash		$5,300
	To record salaries expense
10	Advertising expense	$600
	Accounts payable		$600
	To record advertising expense to be paid following month
11	Utilities expense	$250
	Cash		$250
	To record payment of utilities expense
12	Dividends	$2,000
	Cash		$2,000
	To record payment of dividends
13	Supplies expense	$2,260
	Accounts payable		$2,260
	To record supplies expense for the month
14	Equipment	$7,000
	Cash		$7,000
	To record purchase of computer

T-Accounts:

Cash					Service fees earned
Beg. Bal.	$6,800	1	$510				4	$18,100
2	$7,100	3	$1,800				5	$1,200
5	$1,200	6	$1,400				End.Bal.	$19,300
7	$12,750	8	$650
		11	$250		Rent expense
		12	$2,000		1	$510
		14	$7,000		End.Bal.	$510
End.Bal.	$14,240
					Salaries expense
Accounts receivable					9	$5,300
Beg. Bal.	$10,700	2	$7,100		End.Bal.	$5,300
4	$18,100	7	$12,750
		9	$5,300		Delivery expense
End.Bal.	$3,650				8	$650
					End.Bal.	$650
Equipment
14	$7,000				Advertising expense
End.Bal.	$7,000				10	$600
					End.Bal.	$600
Accounts payable
6	$1,400	Beg. Bal.	$2,100		Utilities expense
		10	$600		11	$250
		13	$2,260		End.Bal.	$250
		End.Bal.	$3,560
					Supplies expense
Notes payable					13	$2,260
3	$1,800	Beg. Bal.	$4,200		End.Bal.	$2,260
		End.Bal.	$2,400
					Dividends
Common stock					12	$2,000
		Beg. Bal.	$2,000		End.Bal.	$2,000
		End.Bal.	$2,000
Retained Earnings
		Beg. Bal.	$9,200
		End.Bal.	$9,200

Requirement b:

Unadjusted Trial balance
Account title	Debit	Credit
Cash	$14,240
Accounts receivable	$3,650
Equipment	$7,000
Accounts payable		$3,560
Notes payable		$2,400
Common stock		$2,000
Retained Earnings		$9,200
Service fees earned		$19,300
Rent expense	$510
Salaries expense	$5,300
Delivery expense	$650
Advertising expense	$600
Utilities expense	$250
Supplies expense	$2,260
Dividends	$2,000
Total	$36,460	$36,460