In March 2011, Mary Tone organized a corporation to provide package delivery services. The company, called Tone Deliveries, Inc., began operations immediately. Transactions during the month of March were as follows:

Mar. 2 The corporation issued 40,000 shares of capital stock to Mary Tone in exchange for $80,000 cash.

Mar. 4 Purchased a truck for $45,000. Made a $15,000 cash down payment and issued a note payable for the remaining balance.

Mar. 5 Paid Sloan Properties $2,500 to rent office space for the month.

Mar. 9 Billed customers $11,300 for services for the first half of March.

Mar.15 Paid $7,100 in salaries earned by employees during the first half of March.

Mar.19 Paid Bill’s Auto $900 for maintenance and repair services on the company truck.

Mar.20 Collected $3,800 of the amounts billed to customers on March 9.

Mar.28 Billed customers $14,400 for services performed during the second half of the month.

Mar.30 Paid $7,500 in salaries earned by employees during the second half of the month.

Mar.30 Received an $830 bill from SY Petroleum for fuel purchased in March. The entire amount is due by April 15.

Mar. 30 Declared a $1,200 dividend payable on April 30.

The account titles used by Tone Deliveries are:

Cash.......................Retained Earnings

Accounts Receivable...............Dividends

Truck.....................Service Revenue

Notes Payable..................Maintenance Expense

Accounts Payable................Fuel Expense

Dividends Payable.................Salaries Expense

Capital Stock...................Rent Expense

Instructions

a. Analyze the effects that each of these transactions will have on the following six components of the company’s financial statements for the month of March. Organize your answer in tabular form, using the column headings shown below. Use I for increase, D for decrease, and NE for no effect. The March 2 transaction is provided for you:

b. Prepare journal entries (including explanations) for each transaction.
c. Post each transaction to the appropriate ledger accounts
d. Prepare a trial balance dated March 31, 2011.
e. Using figures from the trial balance prepared in part d, compute total assets, total liabilities, and owners’ equity. Are these the figures that the company will report in its March 31 balance sheet? Explain your answerbriefly.

Transcribed Image Text:

Income Statement Balance Sheet Transaction Mar. 2 Revenue-Expenses = Net Income Assets Liabilities + Owners' Equity NE NE NE NE