This problem helps to develop journalizing skills by using an actual company's account titles for a selected set of accounts. Refer to the Rainmaker Entertainment Inc. (Rainmaker) financial statements that appear on My Accounting Lab. Assume Rainmaker completed the following selected transactions during December 2011.
a. Made sales on account, $400,435.
b. Paid cash for advertising (general and administration expenses), $13,613.
c. Paid annual interest expense of $421,440.
d. Collected accounts receivable of $7,567.
e. Paid cash for prepaid rent, $36,330.
f. Purchased equipment on account for $5,000.
g. Paid cash for annual rent (general and administration expenses), $15,440.
Required
1. Set up T-accounts for Cash (debit balance of $7,165,119); Trade and Other Accounts Receivable (debit balance of $14,150,696); Prepaid Expenses and Deposits (debit balance of $487,430); Property, Plant, and Equipment (debit balance of $2,788,992); Accounts Payable and Accrued Liabilities (credit balance of $1,303,881); Revenue (credit balance of $18,427,019); General and Administration Expenses ($1,236,871 balance); Interest Expense ($0 balance).
2. Journalize Rainmaker's transactions a to g. Explanations are not required.
3. Post to the T-accounts and compute the balance for each account. Identify each posting by its transaction letter.
4. For each of the accounts, compare your balances to Rainmaker's actual balances as shown on the December 31, 2011, balance sheet and income statement. All your amounts should agree with the actual figures rounded to the nearest dollar.
Cash
Trade and other accounts receivable
Prepaid expenses and deposits
Property, plant, and equipment
Accounts payable and accrued liabilities
Revenue
General and administration expenses
Interest expense
5. Balance sheet and income statement accounts listed are really categories representing summarized account balances. List three accounts that would be reflected in each of the following categories:
a. Property, plant, and equipment,
b. Accounts payable and accrued liabilities, and
c. General and administration expenses.