Prepare journal entries to record each of transaction

Untitled Forums Accounting Prepare journal entries to record each of transaction

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  • #16586
    admin
    Keymaster

    The following information relates to Lee Real Estate Agency during the first month of operations. May 1, 2018, the owner, Jack Lee, invests $40,000 in cash in starting a real estate office operation as a sole proprietorship.

    Transactions during the remainder of the month are as follow:

    Date Transactions

    May 3: Purchased $500 of supplies on credit.

    May 6: Purchased equipment for $9,000, paying $4,000 in cash and signed a 30-d $5,000, note payable.

    May 11: Real estate commissions billed to clients amount to $4,000

    May 13: Paid $800 in cash for the current month’s rent.

    May 18: Paid $200 cash on account for supplies purchased on May 6.

    May 21: Received a bill for $600 for advertising for the current month.

    May 26: Paid $2,500 in cash for office salaries and wages.

    May 27: Li withdrew $1,800 from the business for living expenses.

    May 31: Received a check for $2,500 from a client in payment on account for commission billed on May 11.

    REQUIRED:

    Prepare journal entries to record each of transaction
    Post the journal entries to ledger accounts
    Prepare a trial balance as at May 31, 2018

    • This topic was modified 4 years, 7 months ago by admin.
    #17051
    john Smith
    Participant

    Sure, let’s record the transactions and prepare the journal entries:

    1. May 1: Owner invests $40,000 in cash. Journal Entry:

      rust

      Cash 40,000 Owner'sEquity (Capital) 40,000

    2. May 3: Purchased supplies on credit for $500. Journal Entry:

      scss

      Supplies (Asset) 500 Accounts Payable 500

    3. May 6: Purchased equipment for $9,000, paying $4,000 in cash, and signed a 30-day $5,000 note payable. Journal Entry for cash payment:

      scss

      Equipment (Asset) 4,000 Cash 4,000

      Journal Entry for the note payable:

      scss

      Equipment (Asset) 5,000 Notes Payable 5,000

    4. May 11: Billed clients $4,000 for real estate commissions. Journal Entry:

      Accounts Receivable 4,000 Commission Revenue 4,000

    5. May 13: Paid $800 in cash for the current month’s rent. Journal Entry:

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      Rent Expense 800 Cash 800

    6. May 18: Paid $200 cash on account for supplies purchased on May 6. Journal Entry:

      Accounts Payable 200 Cash 200

    7. May 21: Received a bill for $600 for advertising for the current month. Journal Entry:

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      Advertising Expense 600 Accounts Payable 600

    8. May 26: Paid $2,500 in cash for office salaries and wages. Journal Entry:

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      Salaries and Wages Expense 2,500 Cash 2,500

    9. May 27: Owner withdrew $1,800 from the business for living expenses. Journal Entry:

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      Owner'sWithdrawals (Drawings) 1,800 Cash 1,800

    10. May 31: Received a check for $2,500 from a client in payment on account for commission billed on May 11. Journal Entry:

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      Cash 2,500 Accounts Receivable 2,500

    Next, we’ll post the journal entries to ledger accounts:

    Ledger Accounts:

    1. Cash

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      Date | Description | Debit | Credit | Balance --------------------------------------------------------------------------------- May 1 | Owner's Investment | 40,000 | | 40,000 May 27 | Owner's Withdrawals | | 1,800 | 38,200 May 13 | Rent Expense | | 800 | 37,400 May 18 | Accounts Payable (Supplies) | | 200 | 37,200 May 26 | Salaries and Wages Expense | | 2,500 | 34,700 May 31 | Accounts Receivable (Client) | 2,500 | | 37,200 May 3 | Accounts Payable (Supplies) | | 500 | 36,700 May 21 | Accounts Payable (Advertising) | | 600 | 36,100 May 6 | Equipment | 4,000 | | 40,100 May 6 | Notes Payable (Equipment) | 5,000 | | 45,100

    2. Supplies

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      Date | Description | Debit | Credit | Balance --------------------------------------------------------------------------------- May 3 | Purchased Supplies on Credit | 500 | | 500 May 18 | Payment for Supplies | | 200 | 300

    3. Equipment

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      Date | Description | Debit | Credit | Balance --------------------------------------------------------------------------------- May 6 | Equipment Purchase | 4,000 | | 4,000

    4. Notes Payable

      markdown

      Date | Description | Debit | Credit | Balance --------------------------------------------------------------------------------- May 6 | Equipment Purchase | 5,000 | | 5,000

    5. Accounts Payable

      markdown

      Date | Description | Debit | Credit | Balance --------------------------------------------------------------------------------- May 3 | Purchased Supplies on Credit | | 500 | 500 May 18 | Payment for Supplies | 200 | | 300 May 21 | Advertising Bill | 600 | | 900

    6. Commission Revenue

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      Date | Description | Debit | Credit | Balance --------------------------------------------------------------------------------- May 11 | Commission Billed to Clients | | 4,000 | 4,000

    7. Rent Expense

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      Date | Description | Debit | Credit | Balance --------------------------------------------------------------------------------- May 13 | Rent Payment | 800 | | 800

    8. Advertising Expense

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      Date | Description | Debit | Credit | Balance --------------------------------------------------------------------------------- May 21 | Advertising Bill | 600 | | 600

    9. Salaries and Wages Expense

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      Date | Description | Debit | Credit | Balance --------------------------------------------------------------------------------- May 26 | Office Salaries and Wages | 2,500 | | 2,500

    10. Owner’s Withdrawals (Drawings)

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      Date | Description | Debit | Credit | Balance --------------------------------------------------------------------------------- May 27 | Owner's Withdrawals | 1,800 | | 1,800

    Next, let’s prepare the trial balance as of May 31, 2018:

    Trial Balance as of May 31, 2018:

    markdown

    Account Debit Credit ----------------------------------------------------- Cash 37,200 Supplies 300 Equipment 4,000 Notes Payable 5,000 Accounts Payable 900 Commission Revenue 4,000 Rent Expense 800 Advertising Expense 600

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