Journalizing, Posting, and Preparing a Trial Balance
Herrold Consulting incorporated on February 1, 2011. The company engaged in the following transactions during its first month of operations:
Feb. 1 | Issued capital stock in exchange for $750,000 cash. |
Feb. 5 | Borrowed $50,000 from the bank by issuing a note payable. |
Feb. 8 | Purchased land, building, and office equipment for $600,000. The value of the land was $100,000, the value of the building was $450,000, and the value of the office equipment was $50,000. The company paid $300,000 cash and issued a note payable for the balance. |
Feb. 11 | Purchased office supplies for $600 on account. The supplies will last for several months. |
Feb. 14 | Paid the local newspaper $400 for a full-page advertisement. The ad will appear in print on February 18. |
Feb. 20 | Several of the inkjet printer cartridges that Herrold purchased on February 11 were defective. The cartridges were returned and the office supply store reduced Herrold’s outstanding balance by $100. |
Feb. 22 | Performed consulting services for $6,000 cash. |
Feb. 24 | Billed clients $9,000. |
Feb. 25 | Paid salaries of $5,000. |
Feb. 28 | Paid the entire outstanding balance owed for office supplies purchased on February 11. |
A partial list of the account titles used by the company includes:
Cash | Notes Payable |
Accounts Receivable | Accounts Payable |
Office Supplies | Capital Stock |
Land | Client Service Revenue |
Building | Advertising Expense |
Office Equipment | Salaries Expense |
a. Prepare journal entries, including explanations, for the above transactions.
b. Post each entry to the appropriate ledger accounts (use the T account format as illustrated in Exhibit 3-8 on page 108).
c. Prepare a trial balance dated February 28, 2011. Assume accounts with zero balances are not included in the trial balance.
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