Question

Question 4

(30 marks)

Sam Strong, on March 01, 2018, started his income tax business, Strong Taxes. The following transactions occurred in March 2018:

1. Sam Strong transferred several personal assets to the business: cash $ 60,000, land valued at $ 400,000, and a building valued at $ 100,000.
2. Strong Taxes paid cash for the following items:
   • $ 1,000 Office Supplies
   • $ 5,000 Computer Equipment
   • $ 4,000 Office Furniture
3. Strong Taxes paid consulting fees, $ 3,000 cash.
4. Strong Taxes did tax consulting work and charged the client $ 8,000. That amount will be paid in April 2018.
5. Sam Strong took a vacation and Strong Taxes paid $ 10,000 cash for the vacation.
6. Strong Taxes received a $ 2,500 invoice for placing a radio ad. The invoice will be paid at a later date.
7. Strong Taxes did tax planning work and received $ 12,000 for the tax work done.
8. Strong Taxes prepared several income tax returns and charged the client $ 4,000.
1. Strong Taxes was billed $ 12,000 by its lawyer; Strong Taxes paid cash for half of the billed amount and will pay the remaining balance in May.
10. Strong Taxes received cash for the work it had done preparing the income tax returns for a client.

Required:

1. Journalize the above transactions using the alphabets [A, B, C, etc.] to identify the transaction.
2. Following Exhibit 2-11 on page 79 in your textbook, open the following ledgers:

Cash # 1100

Accounts Receivable # 1200

Office Supplies # 1300

Office Furniture #1400

Computer Equipment #1500

Building #1600

Land #1700

Accounts Payable #2100

Sam Strong, Capital # 3100

Sam Strong, Withdrawals # 3200

Service Revenue # 4100

Consulting Fees Expense #5100

Advertising Expense #5200

Legal Fees Expense #5300

3. Post the journal entries to the ledger accounts, keeping a running balance for each account.
4. Prepare the unadjusted trial balance for Strong Taxes at March 31, 2018.

Answer 1

Answer:-

Given that

Sam strong,on March 01,2018,started his income tax business,Strong Taxes.

The following transactions occurred in March 2018:-

Journal Entries Date Account Title and Explaination Post. Ref. Debit (S) Credit (S) Cash Land Building Sam Strong, Capital (To record cash, land, building transferred to business) $ 60,000.00 $ 400,000.00 $ 100,000.00 $ 560,000.00 $ $ $ 1,000.00 5,000.00 4,000.00 Office Supplies Computer Equipment Office Furniture Cash (To record Cash paid for purchase of Supplies, Computer Equipment, Furniture) $ 10,000.00 $ 3,000.00 Consulting Fees Expense Cash (To record payment of consulting fees) $ 3,000.00

$ 8,000.00 Accounts Receivable Service Revenue (To record service provided on account) $ 8,000.00 $ 10,000.00 Sam Strong, Withdrawals Cash (To record Cash used for personal expenses) $ 10,000.00 $ 2,500.00 Advertising Expense Accounts Payable (To record accrued expenses) $ 2,500.00 $ 12,000.00 Cash Service Revenue (To record service provided for cash) $ 12,000.00

$ 4,000.00 Accounts Receivable Service Revenue |(To record Service provided on account) $ 4,000.00 $ 12,000.00 Legal Fees Expense Cash Accounts Payable (To record legal expense half of which paid and remaining is due) $ $ 6,000.00 6,000.00 $ 4,000.00 Cash Accounts Receivable (To record collection of dues) $ 4,000.00
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