Question

Leon Jackson is ecstatic! First National Bank just approved a loan for Leon to start a Web site design 138 • FINANCIAL ACCOUNTING and maintenance business called Webworks. He is now ready to purchase his needed equipment, hire his administrative help, and begin designing sites. During June, his first month of business, the following occur: a. Webworks signs a note at the bank and is given $10,000 cash. b. Leon deposits $2,000 of his own money into Webworks’s checking account. c. Webworks purchases a new computer and additional equipment for $3,000. d. Webworks purchases supplies worth $200 on account that should last Webworks two months. e. Webworks hires Nancy Po to assist with administrative tasks. She will charge $100 per Web site for her assistance. f. Webworks begins working on his first two Web sites, one for Juan Sanchez, a friend of his dad’s and the other for Pauline Smith, a local businesswoman. g. Webworks completes the site for Mr. Sanchez and sends him a bill for $600. h. Webworks completes the site for Ms. Smith and sends her a bill for $450. i. Webworks collects $600 in cash from Mr. Sanchez. j. Webworks pays Nancy $100 for her work on Mr. Sanchez’s Web site. k. Webworks receives $500 in advance to work on a Web site for a local restaurant. Work on the site will not begin until July. l. Webworks pays taxes of $200 in cash. Required: A. Prepare journal entries for the above events if needed. B. Post the journal entries to T-accounts. C. Prepare an unadjusted trial balance for Webworks for June. D. Prepare adjusting entries for the following and post them to your T-accounts, adding any additional T-accounts as necessary. m. Webworks owes Nancy $100 for her work on Ms. Smith’s Web site. n. Leon’s parents let him know that Webworks owes $80 toward the electricity bill. Webworks will pay them in July. o. Webworks only used half of the supplies purchased in (d) above. E. Prepare an adjusted trial balance for Webworks for June.

Answer 1

	Journal Entries									Unadjusted trial balance
date	explanantion	debit	credit			cash
1-	cash	10000			notes payable	10000	computer	3000		cash	9800
	notes payable		10000		common stock	2000	salary expense	100		notes payable		10000
					accounts receivable	600	tax expense	200		common stock		2000
					unearned revenue	500	balance	9800		computer	3000
2-	cash	2000								supplies	200
	common stock		2000			notes payable				accounts payable		200
					balance	10000	cash	10000		accounts receivables	450
										service revenue		1050
3-	computer	3000								salary expense	100
	cash		3000							unearned revenue		500
						common stock				tax expense	200
					balance	2000	cash	2000		total	13750	13750
4-	supplies	200
	accounts payable		200			computer
					cash	3000	balance	3000		Adjusted Trial balance
5-						supplies				cash	9800
					accounts payable	200	supplies expense	100		notes payable		10000
										common stock		2000
6-	no entry									computer	3000
						accounts payable				supplies	100
					balance	200	supplies	200		accounts payable		200
7-										accounts receivables	450
										service revenue		1050
8-	accounts receivable	600				accounts receivables				salary expense	200
	service revenue		600		service revenue	600	cash	600		unearned revenue		500
					service revenue	450	balance	450		tax expense	200
9-	accounts receivable	450								salaries payable		100
	service revenue		450							electricity expense	80
						service revenue				electricitybill payable		80
10-	cash	600			balance	1050	accounts receivable	600		supplies expense	100
	accounts receivable		600				accounts receivable	450		total	13930	13930
11-	salary expense	100				salary expense
	cash		100		cash	100	balance	200
					salary outstanding	100
12-	cash	500
	unearned revenue		500			unearned revenue
					cash	500	balance	500
13-	tax expense	200
	cash		200			tax expense
					cash	200	balance	200
Adjustment entries
1-	salaries expense	100				salaries payable
	salary outstanding		100		balance	100	salaries expense	100
2-	electricity expense	80				electricity expense
	electricitybill payable		80		electricitybill payable	80	balance	80
3-	supplies expense	100				electricitybill payable
	supplies		100		balance	80	electricity expense	80
						supplies expense
					supplies	100	balance	100