Short Comprehensive Problem
Donegan’s Lawn Care Service began operations in July 201 I. The company uses the following general ledger accounts:
Cash | Capital Stock |
Accounts Receivable | Retained Earnings |
Office Supplies | Mowing Revenue |
Mowing Equipment | Salaries Expense |
Accounts Payable | Fuel Expense |
Notes Payable |
|
The company engaged in the following transactions during its first month of operations:
July 18 | Issued 500shares of capital stock to Patrick Donegan for $1,500. |
July 22 | Purchased office supplies on account for $100. |
July 23 | Purchased mowing equipment for $2,000, paying $400 cash and issuing a 60-day note payable for the remaining balance. |
July 24 | Paid $25 cash for gasoline. All of this fuel will be used in July. |
July25 | Billed Lost Creek Cemetery $150 for mowing services. The entire amount is due July 30. |
July 26 | Billed Golf View Condominiums $200 for mowing services. The entire amount is due August 1. |
July 30 | Collected $150 from Lost Creek Cemetery for mowing services provided on July 25. |
July 31 | Paid $80salary to employee Teddy Grimm for work performed in July. |
a. Record each of the above transactions in general journal form. Include a brief explanation of the transaction as part of each journal entry.
b. Post each entry to the appropriate ledger accounts (use the T account format illustrated in Exhibit 3-8 on page 108).
c. Prepare a trial balance dated July 31, 2011.
d. Explain why the Retained Earnings account has a zero balance in the trial balance.
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