On July 1, 2011, Lauren Plume created a new self-storage business, Safe Storage. The following transactions occurred during the company’s first month.

July 1 Plume invested $28,000 cash and buildings worth $20,000 in the company in exchange for its common stock.

2 The company rented equipment by paying $1,700 cash for the first month’s (July) rent.

5 The company purchased $2,500 of office supplies for cash.

10 The company paid $3,000 cash for the premium on a 12-month insurance policy. Coverage begins on July 11.

14 The company paid an employee $1,700 cash for two weeks’ salary earned.

24 The company collected $11,000 cash for storage fees from customers.

28 The company paid another $1,700 cash for two weeks’ salary earned by an employee.

29 The company paid $700 cash for minor repairs to a leaking roof.

30 The company paid $600 cash for this month’s telephone bill.

31 The company paid $900 cash for dividends.

The company’s chart of accounts follows:

Required

1. Use the balance column format to set up a ledger account for each account listed in its chart of accounts.

2. Prepare journal entries to record the July transactions 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, $1,200 of office supplies are still available.

c. This month’s depreciation on the buildings is $500.

d. An employee earned $120 of unpaid and unrecorded salary as of month-end.

e. The company earned $2,550 of storage fees that are not yet billed at month-end.

5. Prepare the income statement and the statement of retained earnings for the month of July and the balance sheet as of July 31, 2011.

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:

10 Cash 106 Accounts Receivable 24 Office Supplies 128 Prepaid Insurance 173 Buildings 174 Accumulated Depreciation-Buildings 209 Salaries Payable 307 Common Stock 318 Retained Earnings 319 Dividends 40 Storage Fees Earned 606 Depreciation Expense-Buildings 622 Salaries Expense 637 Insurance Expense 640 Rent Expense 650 Office Supplies Expense 684 Repairs Expense 688 Telephone Expense 90 Income Summary