During the first month of operations (January 2014), Music Services Ltd. Completed the following selected transactions:
a. The business has cash of $10,000 and a building valued at $50,000. The corporation issued common shares to the shareholders.
b. Borrowed $50,000 from the bank, and signed a note payable.
c. Paid $60,000 for music equipment.
d. Purchased supplies on account, $1,000.
e. Paid employees' salaries, $1,500.
f. Received $800 for service performed for customers.
g. Performed service to customers on account, $4,500.
h. Paid $100 of the account payable created in transaction (d).
i. Received a $600 utility bill that will be paid in the near future.
j. Received cash on account, $3,100.
k. Paid the following cash expenses: rent, $1,000; advertising, $800.
Requirements
1. Set up the following T-accounts: Cash, Accounts Receivable, Office Supplies, Music Equipment, Building, Accounts Payable, Note Payable, Share Capital, Service Revenue, Salary Expense, Rent Expense, Advertising Expense, and Utilities Expense.
2. Record the foregoing transactions directly in the T-accounts without using a journal. Use the letters to identify the transactions.
3. Prepare the trial balance of Music Services Ltd. at January 31, 2014.
4. The bank manager is afraid that the total liabilities of the business exceed the total assets. He also fears that the business suffered a net loss during January. Compute the amounts needed to answer his questions.