You have been hired as the new assistant financial controller for Autobody Corp., an auto body repair shop. Prepare journal entries for the following transactions, which occurred during August 2014.
a. At the end of the month, prepaid a two-year insurance policy for $5,000.
b. Received contributions from three investors of $90,000 in cash ($30,000 each).
c. Purchased a building for $250,000. The company paid a deposit of $25,000 in cash on August 15 and signed a nine-year note payable for the balance.
d. Paid $8,000 in wages to employees who worked during the month.
e. Rented an unused service bay to an oil change franchise; received cash of $26,000.
f. Provided $30,000 in repair services for customers, all on credit.
g. Received from a customer $5,000 to store some vehicles on the property for the winter. (Record as Unearned Revenue.) h. Paid $750 in cash for water utilities used during the month.
i. Received an electric utility bill for $1,800 for usage in August; the bill will be paid next month.
j. Purchased cleaning supplies on account for $6,000. k. Paid $3,500 on accounts payable for previous purchases. l. Received $3,000 from customers on accounts receivable.
Required
1. Set up appropriate T-accounts. All accounts begin with zero balances.
2. Record in the T-accounts the effects of each transaction for Autobody Corp. in April, referencing each transaction in the accounts with the transaction letter. Show the unadjusted ending balances in the T-accounts.
3. Prepare an unadjusted trial balance as of August 31, 2014.
4. Refer to the revenues and expenses shown on the unadjusted trial balance. Based on this information, write a short memo to the five owners offering your opinion on the results of operations during the first month of business.