Applying the accounting cycle On July 1, 2008, Lula Plume created a new self-storage business, Safe Storage Co. The following transactions occurred during the company’s first month.

July 1. Plume invested \($30,000\) cash and buildings worth \($150,000\) in the business.
2 Rented equipment by paying \($2,000\) cash for the first month’s (July) rent. (Hint: Safe Storage debited Rent Expense for this payment.)
5 Purchased \($2,400\) of office supplies for cash.
10 Paid \($7,200\) cash for the premium on a 12-month insurance policy. Coverage begins on July 11.
14 Paid an employee \($1,000\) cash for two weeks’ salary earned.
24 Collected \($9,800\) cash for storage fees from customers.

26 Paid another \($1,000\) cash for two weeks’ salary earned by an employee.
27 Paid \($950\) cash for minor repairs to a leaking roof, 27 Paid \($400\) cash for this month’s telephone bill.
28 Plume withdrew \($2,000\) cash for personal use.
The company’s chart of accounts follows:

Required 

1. Use the balance column format to set up each ledger account listed in its chart of accounts.
2. Prepare journal entries to record the transactions for July and post them to the ledger accounts. Record prepaid and unearned items in balance sheet accounts.
3. Prepare an unadjusted trial balance as of July 31.
4. Use the following information to journalize and post adjusting entries for the month:

a. Two-thirds of one month’s insurance coverage has expired.

b. At the end of the month, \($1,525\) of office supplies are still available.
c. This month’s depreciation on the buildings is \($1,500.\)

d. An employee earned \($100\) of unpaid and unrecorded salary as of month-end.
5. Prepare the income statement and the statement of owner’s equity for the month of July and the balance sheet at July 31, 2008.
6. Prepare journal entries to close the temporary accounts and post these entries to the ledger.
7. Prepare a post-closing trial balance.

Transcribed Image Text:

101 Cash 401 Storage Fees Earned 106 Accounts Receivable 606 Depreciation Expense-Buildings 124 Office Supplies 622 Salaries Expense 128 Prepaid Insurance 637 Insurance Expense 173 Buildings 640 Rent Expense 174 Accumulated Depreciation-Buildings 650 Office Supplies Expense 209 Salaries Payable 684 Repairs Expense 301 L. Plume, Capital 688 Telephone Expense 302 L Plume, Withdrawals. 901 Income Summary