Question

Junktrader is an online company that specializes in matching buyers and sellers of used items. Buyers and sellers can purchase a membership with Junktrader, which provides them advance notice of potentially attractive offers. a. Junktrader provided online advertising services for another company for $325 on account. b. On the last day of the month, Junktrader paid $120 cash to run an ad promoting the company's services. The ad ran that day in the local newspaper. c. Received $215 cash in membership fees for the month from new members. d. Received an electricity bill for $96 for usage this month. The bill will be paid next month. e. Billed a customer $374 for helping sell some junk. Junktrader expects to receive the customer's payment by the end of next month. Required: 1. Prepare journal entries for the above transactions, which occurred during a recent month. 2. Determine Junktrader's preliminary net income. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Prepare journal entries for the above transactions, which occurred during a recent month. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.) No Transaction General Journal Debit Credit 1 a. Accounts Receivable ✓ 325 Service Revenue 325 2 b. 120 Advertising Expense Cash olol 120 3 C. Cash 215 Accounts Receivable X 215 4 d. x 96 No Journal Entry Required Notes Payable (short-term) x 96 5 e. Accounts Receivable ✓ 374 Service Revenue 374

Answer 1

Answer:1

The Journal entries are as follows:

Transaction	General Journal	Debit	Credit
a.	Accounts receivable Dr.	$ 325
	Service revenue - Advertising		$ 325
	(To record advertising services provided on account)
b.	Advertising expense Dr.	$ 120
	cash		$ 120
	(To record expenses paid)
c.	Cash Dr.	$ 215
	Membership fees revenue		$ 215
	(To record fees revenue earned)
d.	Utilities expense Dr.	$        96
	Accounts payable		$        96
	(To record expenses on accrual basis)
e.	Accounts receivable Dr.	$ 374
	Service revenue - Sales		$ 374
	(To record sales revenue earned on account)

Answer:2

The preliminary net income is calculated as follows:

JUNKTRADER COMPANY
Income Statement
Revenues:
Service revenue- Advertising	$        325
Service revenue- Sales	$        374
Membership fees revenue	$        215
Total revenue (a)		$ 914
Expenses:
Advertising expense	$ 120
Utilities expense	$ 96
Total expenses (b)		$        216
Net income (a- b)		$        698

Therefore, Junktrader's preliminary net income is $698.