Question

A company provides services to customers on account for $2,400. Indicate the amount of increases and decreases in the accounting equation.

51. Below are the transactions for Cleaning Racer, Inc. for April, the first month of operations. April 1 April 2 April 7 April 10 April 12 April 16 April 19 April 23 April 29 April 30 April 30 Borrow$50,000 from the bank by signing a note. s sue common stock in exchange for cash of $20,000. Purchase equipment for $40,000 cash. Purchase cleaning supplies of $4,000 on account. Provide services of $5,000 for cash. Pay employees $1,200 for work performed Pay for advertising in a local newspaper, costing $500. Provide services of $7,000 on account. Pay employees $1,500 for work performed. A utility bill of $1,200 for the current month is paid. Pay dividends of $700 to stockholders. Required: 1. Record each transaction. 2. Post each transaction to the appropriate T-accounts 3. Calculate the balance of each account. 4. Prepare a trial balance for June. Racer uses the following accounts: Cash, Accounts Receivable, Supplies, Equipment, Accounts Payable, Notes Payable, Common Stock, Dividends, Service Revenue, Salaries Expense, Advertising Expense, and Utilities Expense.

Answer 1

1. Journal entries for recording of the transactions :-

Date	particulars	Debit ($)	credit($)
April 1	cash a/c	50000
	To note payable a/c		50000
	(Being signed note payable and received cash)
April 2	cash a/c	20000
	To common stock a/c		20000
	(Being common stock issued per cash)
April 7	equipment a/c	40000
	To cash a/c		40000
	(Being equipment purchased with cash)
April 10	supplies a/c	4000
	To accounts payable a/c		4000
	(being supplies purchased on account)
April 12	cash a/c	5000
	To service revenue		5000
	(Bank cash received for services rendered)
April 16	salaries expense a/c	1200
	To cash a/c		1200
	(Being salaries paid to employees)
April 19	advertising expense a/c	500
	To cash		500
	(being advertising expenses paid)
April 23	accounts receivable a/c	7000
	To service revenue a/c		7000
	(Being services rendered on account)
April 29	salaries expense a/c	1500
	To cash		1500
	(Being salaries paid to employees)
April 30	utilities expenses a/c	1200
	To Cash a/c		1200
	(Being utilities bill paid)
April 30	dividend a/c	700
	To cash a/c		700
	(Being dividend paid to common stockholders)

2. T accounts

Date	Particulars	Amount ($)	Date	Particulars	Amount ($)
Cash account
April 1	to note payable	50000	April 7	by equipment	40000
April 2	to common stock	20000	April 16	by salaries	1200
April 12	To service revenue	5000	April 19	by advertisement expenses	500
			April 29	by salaries	1500
			April 30	by utilities expenses	1200
			April 30	by dividend	700
			April 30	by balance c/d	29900
		75000			75000
Note payable account
April 30	to balance c/d	50,000	April 1	by cash	50,000
		50,000			50,000
Equipment account
April 7	to cash	40000	April 30	by balance c/d	40000
		40000			40000
Common stock account
April 30	To balance c/d	20000	April 2	by cash	20000
		20000			20000
Supplies account
April 10	to accounts payable	4000	April 30	by balance c/d	4000
		4000			4000
Accounts payable account
April 30	by balance c/d	4000	April 10	by supplies	4000
		4000			4000
Service revenue account
April 30	by balance c/d	12000	April 12	by cash	5000
			April 23	accounts receivable	7000
		12000			12000
Salaries account
April 16	to cash	1200	April 30	by balance c/d	2700
April 29	to cash	1500
		2700			2700
Advertisement expenses account
April 19	To cash	500	April 30	by balance c/d	500
		500			500
Account receivable account
April 23	to service revenue	7000	April 30	by balance c/d	7000
		7000			7000
Utilities expenses account
April 30	to cash	1200	April 30	by balance c/d	1200
		1200			1200
Dividends account
April 30	to cash	700	April 30	by balance c/d	700
		700			700

3. Account balances of each account

Account	Balance
Cash	29900
Note payable	50000
Equipment	40000
Common stock	20000
Supplies	4000
Accounts payable	4000
Service revenue	12000
Salaries	2700
Advertisement expenses	500
Accounts receivable	7000
Utilities	1200
Dividends	700

4. Trial balance for the month of June. Particulars

Particulars	amount ($)	particulars	Amount ($)
Cash	29900	note payable	50,000
Equipment	40000	Common stock	20000
Account receivables	7000	Service revenue	12000
Dividends	700	Accounts payable	4000
Salaries	2700
Supplies	4000
Utilities	1200
Advertisement expenses	500
	86000		86000

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