A friend named Jay Barlow has asked what effect certain transactions will have on his company. Time

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A friend named Jay Barlow has asked what effect certain transactions will have on his company. Time is short, so you cannot apply the detailed procedures of journalizing and posting. Instead, you must analyze the transactions without the use of a journal. Barlow will continue the business only if he can expect to earn monthly net income of at least $5,000. The following transactions occurred this month:
a. Barlow deposited $7,000 cash in a business bank account, and the corporation issued common stock to him.
b. Borrowed $6,000 cash from the bank and signed a note payable due within 1 year.
c. Paid $ 1,300 cash for supplies.
d. Purchased advertising in the local newspaper for cash, $1,800.
e. Purchased office furniture on account, $5,400.
f. Paid the following cash expenses for one month: employee salary-$2,000; office rent-$1,200.
g. Earned revenue on account, $8,000.
h. Earned revenue and received $2,500 cash.
i. Collected cash from customers on account, $ 1,200.
j. Paid on account, $1,000.
Requirements
1. Set up the following T-accounts: Cash, Accounts Receivable, Supplies, Furniture, Accounts Payable, Notes Payable, Common Stock, Service Revenue, Salary Expense, Advertising Expense, and Rent Expense.
2. Record the transactions directly in the accounts without using a journal. Key each transaction by letter.
3. Construct a trial balance for Barlow Networks, Inc., at the current date. List expenses with the largest amount first, the next largest amount second, and so on.
4. Compute the amount of net income or net loss for this first month of operations. Why or why not would you recommend that Barlow continue in business?
Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on...
Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
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Financial Accounting

ISBN: 978-0134127620

11th edition

Authors: Walter Harrison, Charles Horngren, William Thomas, Wendy Tietz

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