Question

NAME Problem-Analyze/Post/ Prepare a Trial Balance: Madison Services organized and opened for business on August 1st. During the month the company completed the following transactions: On Aug. 1, Maggie Madison invested $25,000 cash and $10,000 of computer equipment for common stock On Aug. 2, company paid $2,400 cash for insurance policy covering the next 12 months. On Aug. 5, company purchased office supplies for $1,000, on credit. On Aug. 7, made first sale to a customer and collected $3,000 cash. On Aug. 8, company paid $800 for May's rent. On Aug. 15, company sellsservices for $10,000 and sends a bill to customer. On Aug. 18, company paid $800 cash to partially satisfy item recorded on May5. On Aug. 31, company paid $3,000 cash in salaries to staff. On Aug. 31, company paid a $1,000 cash dividend. Required: 1. Prepare general journal entries to record these transactions. (Explanations are not required.) 2. Posted the journal entries the correct T-accounts. 3. Prepare a Trial Balance for Madison Services at August 31, 2014.

Answer 1

1) Journal Entries: CREDIT CREDIT DATE Aug. 1 DEBIT $25,000 $10,000 DATE Aug. 15 DEBIT $10,000 $10,000 $35,000 Aug. 18 $800 Aug. 2 $2,400 ACCOUNT TITLES AND EXPLANATION Accounts Receivable Service Revenue Accounts Payable Cash Salary Expense Cash Dividends Cash $800 $2,400 Aug. 31 ACCOUNT TITLES AND EXPLANATION Cash Equipment Common Stock Prepaid Insurance Cash Supplies Accounts Payable Cash Service Revenue Rent Expense Cash $3,000 Aug. 5 $1,000 $3,000 $1,000 Aug. 31 $1,000 Aug. 7 $3,000 $1,000 $3,000 Aug. 8 $800 $800

2) T-Accounts: Accounts Receivable $10,000 Supplies $1,000 Aug. 15 Aug. 5 Aug. 1 Aug. 7 Cash $25,000 Aug. 2 $3,000 Aug. 8 Aug. 18 Aug. 31 Aug. 31 $20,000 $2,400 $800 $800 $3,000 $1,000 End. Bal. $10,000 End. Bal. $1,000 End. Bal. Prepaid Insurance $2,400 Equipment $10,000 Accounts Payable $800 Aug. 5 Aug. 2 Aug. 1 Aug. 18 $1,000 End. Bal. $2,400 End. Bal. $10,000 End. Bal. $200 Common Stock Aug. 1 Dividends $1,000 $35,000 Aug. 31 Service Revenue Aug. 7 Aug. 15 End. Bal. $3,000 $10,000 $13,000 End. Bal. $35,000 End. Bal. $1,000

Salary Expense $3,000 Rent Expense $800 Aug. 31 Aug. 8 End. Bal. $3,000 End. Bal. $800 Credit Madison Services Trial Balance August 31, 2014 Account Titles Debit Cash $20,000 Accounts Receivable $10,000 Supplies $1,000 Prepaid Insurance $2,400 Equipment $10,000 Accounts Payable Common Stock Dividends $1,000 Service Revenue Salary Expense $3,000 Rent Expense $800 Totals $48,200 $200 $35,000 $13,000 $48,200