Question: Your friend Dean McChesney requested that you advise him on

Your friend, Dean McChesney, requested that you advise him on the effects that certain transactions will have on his business, A-Plus Travel Planners. Time is short, so you cannot journalize the transactions. Instead, you must analyze the transactions without a journal. McChesney will continue the business only if he can expect to earn a monthly net income of $ 6,000. The business completed the following transactions during June:
a. McChesney deposited $ 10,000 cash in a business bank account to start the company. The company issued common stock to McChesney.
b. Paid $ 300 cash for office supplies.
c. Incurred advertising expense on account, $ 700
d. Paid the following cash expenses: administrative assistant’s salary, $ 1,400; office rent, $ 1,000.
e. Earned service revenue on account, $ 8,800.
f. Collected cash from customers on account, $ 1,200.

1. Open the following T-accounts: Cash; Accounts Receivable; Office Supplies; Accounts Payable; Common Stock; Service Revenue; Salaries Expense; Rent Expense; and Advertising Expense.
2. Post the transactions directly to the accounts without using a journal. Record each transaction by letter. Calculate account balances.
3. Prepare a trial balance at June 30, 2016.
4. Compute the amount of net income or net loss for this first month of operations. Would you recommend that McChesney continue in business?

  • CreatedJanuary 16, 2015
  • Files Included
Post your question