Question

The following accounting events apply to Mary’s Designs for Year 1:

Asset Source Transactions

1. Began operations by acquiring $21,000 of cash from the issue of common stock.
2. Performed services and collected cash of $900.
3. Collected $4,900 of cash in advance for services to be provided over the next 12 months.
4. Provided $12,100 of services on account.
5. Purchased supplies of $490 on account.

Asset Exchange Transactions

6. Purchased $4,900 of land for cash.
7. Collected $7,900 of cash from accounts receivable.
8. Purchased $540 of supplies with cash.
9. Paid $3,200 for one year’s rent in advance.

Asset Use Transactions

10. Paid $2,500 cash for salaries of employees.
11. Paid a cash dividend of $2,200 to the stockholders.
12. Paid off $490 of the accounts payable with cash.

Claims Exchange Transactions

13. Placed an advertisement in the local newspaper for $180 on account.
14. Incurred utility expense of $75 on account.

Adjusting Entries

15. Recognized $3,675 of revenue for performing services. The collection of cash for these services occurred in a prior transaction. (See Event 3.)
16. Recorded $1,280 of accrued salary expense at the end of Year 1.
17. Recorded supplies expense. Had $85 of supplies on hand at the end of the accounting period.
18. Recognized three months of expense for prepaid rent that had been used up during the accounting period.

b. Prepare a before-closing trial balance.

	MARY’S DESIGNS Before-Closing Trial Balance December 31, Year 1 Account Titles Debit Credit Total $0 $0

Answer 1

CREDIT [$21,000 + $900 + $4,900 - $4,900 + $7,900 - $540 - $3,200 - $2,500 - $2,200 - $490 ($12,100 - $7,900 [Ending balance given] [$3,200 x (9/12) -->3 months' rent will expire in next accounting period] MARY'S DESIGNS Before-Closing Trial Balance December 31, Year 1 ACCOUNT TITLES DEBIT Cash $20,870 Accounts Receivable $4,200 Supplies $85 Prepaid Rent $2,400 Professional Library Land $4,900 Accounts Payable Utilities Payable Salaries Payable Unearned Service Revenue Common Stock Dividends $2,200 Service Revenue Salaries Expense $3,780 Rent expense $800 Supplies Expense $945 Advertising Expense $180 Utilities Expense $75 TOTALS $40,435 $180 ($490 - $490 + $180] $75 $1,280 $1,225 ($4,900 - $3,675] $21,000 $16,675 ($900 + $12,100 + $3,675] [$2,500 + $1,280] [$3,200 x (3/12) --> 3 months' rent is expired] [$490 + $540 - $85] $40,435