Jessica Pothier opened FunFlatables on June 1. The company rents out moon walks and inflatable slides for parties and corporate events. The company also has obtained the use of an abandoned ice rink located in a local shopping mall, where its rental products are displayed and available for casual hourly rental by mall patrons. The following transactions occurred during the first month of operations.
1. Jessica contributed $ 50,000 cash to the company on June 1 in exchange for its common stock.
2. Purchased inflatable rides and inflation equipment on June 2, paying $ 20,000 cash.
3. Received $ 5,000 cash from casual hourly rentals at the mall on June 3.
4. Rented rides and equipment to customers for $ 10,000. Received cash of $ 2,000 on June 4 and the rest is due from customers.
5. Received $ 2,500 from a large corporate customer on June 5 as a deposit on a party booking for July 4.
6. Began to prepare for the July 4 party by purchasing various party supplies on June 6 on account for $ 600.
7. On June 7, paid $ 6,000 in cash for renting the mall space this month.
8. On June 8, prepaid next month’s mall space rental charge of $ 6,000.
9. Received $ 1,000 on June 9 from customers on accounts receivable.
10. Paid $ 1,000 for running a television ad on June 10.
11. Paid $ 4,000 in wages to employees on June 30 for work done during the month.
Required:
1. Record the effects of transactions (1) through (11) using journal entries.
2. If you are completing this requirement manually, set up appropriate T- accounts. All accounts begin with zero balances. Summarize the journal entries from requirement 1 in the T- accounts, referencing each transaction in the accounts with the transaction number. Show the unadjusted ending balances in the T- accounts. If you are using the GL tool in Connect, your answers to requirement 1 will have been posted automatically to general ledger accounts that are similar in appearance to Exhibit 2.9.
3. Prepare an unadjusted trial balance for the end of June. If you are using the GL tool in Connect, this requirement is completed automatically using your previous answers.
4. Refer to the revenues and expenses shown on the unadjusted trial balance to calculate preliminary net income and determine whether the net profit margin is better or worse than the 30.0 percent earned by a close competitor.