Question

C1 - Transactions of Star Company for the month of January 2019 are presented below: 1. On January 1, 2019, the owner invested $75,000 cash in the business. 2. Purchased equipment for $35,000 cash. 3. Purchased supplies on account for $8,000. 4. Received a bill for $1,250 for advertising of the current month. 5. Provided $17,500 of programming services for customers. Star company received cash of $7,500 from customers, and billed the customers with the remaining amount. 6. Paid the following January expenses in cash: salaries $4,500, rent $3,000, and utilities $1,000. 7. Paid its $1,250 advertising bill in cash. 8. The owner withdrew $6,500 in cash from the business for his personal use. Required: 1- Prepare journal entries to record the above transactions. (5 marks) 2- Post to the appropriate ledger accounts. (5 marks) 3- Prepare the trial balance of Star Company on January 31, 2019. (5 marks)

Answer 1

1)

Number	Particulars	Debit	Credit
1	Cash	$        75,000
	Capital		$        75,000
	(Capital invested in business)
2	Equipment	$        35,000
	Cash		$        35,000
	(Purchase of equipment)
3	Supplies	$          8,000
	Accounts payable		$          8,000
	(Purchase of supplies)
4	Advertising expense	$          1,250
	Accounts payable		$          1,250
	(Advertising expense bill received)
5	Cash	$          7,500
	Accounts receivable	$        10,000
	Service revenue		$        17,500
	(Service revenue recoginsed and cash received)
6	Salaries expense	$          4,500
	Rent expense	$          3,000
	Utilities expense	$          1,000
	Cash		$          8,500
	(January salaries paid)
7	Accounts payable	$          1,250
	Cash		$          1,250
	(Advertising bill paid)
8	Capital	$          6,500
	Cash		$          6,500
	(Cash withdrawal by owner)

2)

Cash					Accounts receivabe
Beg.bal.	$           -				Beg.bal.	$               -
Capital	$ 75,000		1		Service revenue	$     10,000		5
Equipment		$ 35,000	2
Service revenue	$    7,500		5
Salaries expense		$    4,500	6
Rent expense		$    3,000	6
Utility expense		$    1,000	6
Accounts payable		$    1,250	7
Capital		$    6,500	8
End. Bal.	$ 31,250				End. Bal.	$     10,000
Supplies					Equipment
Beg.bal.	$           -				Beg.bal.	$               -
Accounts payable	$    8,000				Cash	$     35,000		2
End. Bal.	$    8,000				End. Bal.	$     35,000
Advertising expense					Salaries expense
Beg.bal.	$           -				Beg.bal.	$               -
Accounts payable	$    1,250				Cash	$        4,500		6
End. Bal.	$    1,250				End. Bal.	$        4,500
Rent expense					Utilities expense
Beg.bal.					Beg.bal.
Cash	$    3,000		6		Cash	$        1,000		6
End. Bal.	$    3,000				End. Bal.	$        1,000
Capital					Accounts payable
Beg.bal.					Beg.bal.
cash		$ 75,000	1		Supplies		$    8,000	3
Cash	$    6,500				Advertising expense		$    1,250	4
					Cash	$        1,250		7
End. Bal.		$ 68,500			End. Bal.		$    8,000
Service revenue
Beg.bal.
Cash		$    7,500	5
Accounts receivable		$ 10,000	5
End. Bal.		$ 17,500

3)

Trail Balane of Star Company on January 31,2019
Particulars	Debit	Credit
Cash	$     31,250
Accounts receivable	$     10,000
Supplies	$        8,000
Equipment	$     35,000
Advertising expense	$        1,250
Salaries expense	$        4,500
Rent expense	$        3,000
Utilities expense	$        1,000
Capital		$ 68,500
Accounts payable		$    8,000
Service revenue		$ 17,500
Totals	$     94,000	$ 94,000