Question

On July 1, 2013, Swarina Patel created a new self-storage business, Patel Storage Co. The following transactions occurred during the company's first month July1 Patel invested $30,000 cash and buildings worth $150,000 in the company in exchange for common stock 2 The company rented equipment by paying $2,000 cash for the first month's (July) rent. 5 The company purchased $2,400 of office supplies for cash 10 The company paid $7,200 cash for the premium on a 12-month insurance policy. Coverage begins on July 11 14 The company paid an employee $1,000 cash for two weeks' salary earned. 24The company collected $9,800 cash for storage fees from customers. 28The company paid $1,000 cash for two weeks' salary earned by an employee 29The company paid $950 cash for minor repairs to a leaking roof. 30The company paid $400 cash for this month's telephone bill. 31 The company paid $2,000 cash for dividends. The company's chart of accounts follows: 101 Cas 401 Storago Fees Eamed 606 Depreciation Expense Buildings 622 Salaries Expense 637 Insurance Expense 640 Rent Expense 106 Accounts Recelvable 124 Office Supplies 128 Prepaid Insurance 173 Bulldings 174 Accumulated Depreciation Buildings 650 Office Supplies Expense 209 Salaries Payable 307 Common Stock 318 Retained Earnings 319 Dividends 684 Repairs Expense 688 Telephone Expense 901 Income Summary Required 1. Use the balance column format to set up each ledger account listed in its chart of accounts. 2. Prepare journal entries to record the transactions for July and post them to the ledger accounts Record prepaid and unearned items in balance sheet accounts 3. Prepare an unadjusted trial balance as o July 31 4. Use the following information to journalize and post adjusting entries for the month: o Two-thirds of one month's insurance coverage has expired o At the end of the month, $1,525 of office supplies are still available

Answer 1

	2..Journal entries
Date	Account Title	Debit	Credit
1-Jul	Cash	30000
	Buildings	150000
	Common stock		180000
2	Rent expenses	2000
	Cash		2000
5	Office Supplies	2400
	Cash		2400
10	Insurance expense	7200
	Cash		7200
14	Salaries Expense	1000
	Cash		1000
24	Cash	9800
	Storage Fees Earned		9800
28	Salaries Expense	1000
	Cash		1000
29	Repair expense	950
	Cash		950
30	Telephone Expense	400
	Cash		400
31	Dividends	2000
	Cash		2000
		206750	206750

1&2	Ledger Accounts			Net ledger balances
Date	Account Title	Debit	Credit	Debit	Credit
	Buildings	150000		150000
1-Jul	Cash	30000
	Cash		2000
	Cash		2400
	Cash		7200
	Cash		1000
24	Cash	9800
	Cash		1000
	Cash		950
	Cash		400
	Cash		2000	22850
	Common stock		180000		180000
31	Dividends	2000		2000
10	Insurance expense	7200		7200
5	Office Supplies	2400		2400
2	Rent expenses	2000		2000
29	Repair expense	950		950
14	Salaries Expense	1000
28	Salaries Expense	1000		2000
	Storage Fees Earned		9800		9800
30	Telephone Expense	400		400
		206750	206750	189800	189800

3.Unadjusted Trial Balance
	Debit	Credit
Buildings	150000
Cash	22850
Common stock		180000
Dividends	2000
Insurance expense	7200
Office Supplies	2400
Rent expenses	2000
Repair expense	950
Salaries Expense	2000
Storage Fees Earned		9800
Telephone Expense	400
Total	189800	189800

4..Adjusting Entries
Prepaid insurance	6800
Insurance expense		6800
7200-(7200/12*2/3)
Supplies Expense	875
Office Supplies		875
(2400-1525)
Depreciation expense-Buildings	1500
Accumulated Depreciation -Buildings		1500
Salaries Expense	100
Salaries payable		100
Accounts receivable	1150
Storage Fees Earned		1150

5….	Unadjusted T/B		Adjusting Entries		Adjusted T/B
	Debit	Credit	Debit	Credit	Debit	Credit
Cash	22850				22850
Accounts receivable			1150		1150
Office Supplies	2400		-875		1525
Prepaid Insurance			6800		6800
Buildings	150000				150000
Accumulated Depreciation -Buildings				1500		1500
Salaries payable				100		100
Common stock		180000				180000
Storage Fees Earned		9800		1150		10950
Insurance expense	7200		-6800		400
Supplies Expense			875		875
Rent expenses	2000				2000
Repair expense	950				950
Salaries Expense	2000		100		2100
Telephone Expense	400				400
Depreciation expense-Buildings			1500		1500
Dividends	2000				2000
Total	189800	189800	2750	2750	192550	192550

Income Statement
Storage Fees Earned		10950
Less: Expenses:
Insurance expense	400
Supplies Expense	875
Rent expenses	2000
Repair expense	950
Salaries Expense	2100
Telephone Expense	400
Depreciation expense-Buildings	1500
Total expenses		8225
Net Income		2725

Statement of retained earnings
Net Income for the month		2725
Less: Dividends		2000
Ending retained earnings		725

Balance Sheet
As at july 31
Assets
Current assets
Cash	22850
Accounts receivable	1150
Office Supplies	1525
Prepaid Insurance	6800
Total current assets		32325
Fixed assets
Buildings	150000
Less:Accumulated Depreciation -Buildings	1500
Buildings,Net		148500
Total Assets		180825
Liabilities & Owner's equity
Current Liabilities
Salaries payable		100
Owner's Equity
Common stock	180000
Retained Earnings	725
Total Owner's Equity		180725
Liabilities & Owner's equity		180825

6..CLOSING ENTRIES:
Storage Fees Earned	10950
Income Summary		10950
Income Summary	8225
Insurance expense		400
Supplies Expense		875
Rent expenses		2000
Repair expense		950
Salaries Expense		2100
Telephone Expense		400
Depreciation expense-Buildings		1500
Income Summary	2725
Retained Earnings		2725
Retained Earnings	2000
Dividends		2000

7..Post-closing T/B	Debit	Credit
Cash	22850
Accounts receivable	1150
Office Supplies	1525
Prepaid Insurance	6800
Buildings	150000
Accumulated Depreciation -Buildings		1500
Salaries payable		100
Common stock		180000
Retained earnings		725
Total	182325	182325