Question

QUESTION 1 Problem 1 Recording transactions in the general journal and T-accounts The following events apply to ABC Company for Year 1, its first year of operation: Received cash of $36,000 from the issue of common stock. Performed $48,000 of services on account. Incurred $6,500 of other operating expenses on account. Paid $21,000 cash for salaries expense. Collected $34,500 of accounts receivable. Paid a $3,000 dividend to the stockholders. Performed $9,500 of services for cash. Paid $5,500 of the accounts payable.

Required a. Record the preceding transactions in general journal form. b. Post the entries to T-accounts and determine the ending balance in each account. c. Determine the amount of total assets at the end of Year 1. d. Determine the amount of net income for Year 1.

Answer 1

a.

Date Credit Account title Cash Common stock Debit 36,000 36,000 48,000 Accounts receivable Service revenue 48,000 6,500 Operating expenses Accounts payable 6,500 21,000 Salaries expense Cash 21,000 34,500 Cash Accounts receivable 34,500 3,000 Dividends Cash 3,000 9,500 Cash Service revenue 9,500 5,500 Accounts payable Cash 5,500

b.

Cash 36,000 34,500 9,500 50,500 21,000 3,000 5,500 Accounts receivable 48,000 34,500 13,500 Accounts payable 5,500 6,500 1,000 Operating expense 6,500 Salaries expense 21,000 Dividends 3,000 Common stock 36,000 Service revenue 48,000 9,500 57,500

c.

Cash Accounts receivable Total assets 50,500 13,500 64,000

Total assets at the end of year 1 = 64,000

d.

57,500 Service revenue Less: expenses Operating expense Salaries expense Net income -6,500 -21,000 30,000

Amount of net income for year 1 is $30,000.