Question

Karla Tanner opens a Web consulting business called Linkworks and completes the following transactions in its first month of operations.
April 1
Tanner invests $125,000 cash along with office equipment valued at $30,000 in the company in exchange for common stock.

2
The company prepaid $7,200 cash for 12 months' rent for office space. (Hint: Debit Prepaid Rent for $7,200.)

3
The company made credit purchases for $15,000 in office equipment and $3,000 in office supplies. Payment is due within 10 days.

6 The company completed services for a client and immediately received $2,000 cash.
9 The company completed a $10,000 project for a client, who must pay within 30 days.
13 The company paid $18,000 cash to settle the account payable created on April 3.
19
The company paid $6,000 cash for the premium on a 12-month insurance policy. (Hint: Debit Prepaid Insurance for $6,000.)

22
The company received $8,000 cash as partial payment for the work completed on April 9.

25 The company completed work for another client for $2,640 on credit.
28 The company paid $6,200 cash in dividends.
29 The company purchased $1,000 of additional office supplies on credit.
30 The company paid $700 cash for this month's utility bill.


Required:
1.
Prepare general journal entries to record these transactions.

2.
Post the journal entries from part 1 to the ledger accounts.

Answer 1

Answer:

1. Journal entries recording:

April 1

Dr Cash                               125,000

Dr Office Equipment           30,000

Cr Common Stock             155,000  

( to record owner's capital contribution)

April 2

Dr Prepaid Rent        7,200

Cr Cash                     7,200

(to record rent expenses paid 12-month in advance)

April 3

Dr Office equipment         15,000

Dr Office Supplies             3,000

Cr Account Payable         18,000

(to record purchase on account of office supplies/equipment)

April 6

Dr Cash                             2,000

Cr Services revenue        2,000

( to record the cash collection from revenue delivered)

April 9

Dr Account Receivable         10,000

Cr Service revenue               10,000

(to record revenue delivered on account basis)

April 13

Dr Account Payable                18,000

Cr Cash                                    18,000

April 19

Dr Prepaid Insurance             6,000

Cr Cash                                   6,000

(to record payment for 12-month insurance)

April 22

Dr Cash                               8,000

Cr Account Receivable     8,000

(to record account receivable collection)

April 25

Dr Account receivable           2,640

Cr Service revenue               2,640

(to record revenue delivered on account basis)

April 28

Dr Retained Earnings                 6,200

Cr Cash                                      6,200

(to record dividend payment)

April 29

Dr Office supplies             1,000

Cr Account Payable         1,000

(to record office supplies purchased on account)

April 30

Dr Utility expenses         700

Cr Cash                           700

(to record utility expenses)

April 30

Dr Rent expenses              600

Dr Insurance expenses      500

Cr Prepaid Rent                  600

Cr Prepaid Insurance         500

( closing entries for rent and insurance expenses)

2.

Cash Leger

Debit side:

April 1 125,00 + April 6 2,000 + April 22 8,000 = $135,000

Credit side:

April 2 7,200 + April 13 18,000 April 19 6,000 + April 28 6,200 April 30 700 = $38,100

=> Final Cash ledger balance Debit: $96,900

Prepaid Rent ledger:

Debit side: April 2: 7,200

Credit side: April 30: 600

=> Final Prepaid Rent Ledger Debit $6,600

Prepaid Insurance ledger:

Debit side: April 19 6,000

Credit side: April 30 500

=> Final Prepaid Rent Ledger Debit $5,500

Account receivable:

Debit side: April 10 10,000; April 25: 2,640

Credit side: 8,000

=> Final balance of Account Receivable Debit $4,640

Office Equipment:

Debit side: April 1 30,000; April 3: 15,000;

=> Final balance of Office Equipment Debit $45,000

Office Supplies:

Debit side: April 3 3,000; April 29: 1,000;

=> Final balance of Office Supplies Debit $4,000

Account Payable:

Debit side: April 13: 18,000

Credit side: April 3: 18,000 April 29: 1,000

=> Final balance Credit $1,000

Service Revenue:

Credit side: April 6 2,000; April 9: 10,000 April 25: 2,640

=> Final balance Credit $14,640

Utility expenses:

Debit side: April 30: 700

=> Final balance: Debit side $700

Rent expenses:

Debit side: 30 April 600

=> Final balance: Debit side $600

Insurance expenses:

Debit side: 30 April 500

=> Final balance: Debit side $500

Common stock

April 1: Credit side 125,000

=> Final balance: Credit side $125,000

Retained earnings:

Debit side: April 28 6,200

=> Final balance: Debit side $6,200

Explanation: