Chambers Brokerage Services Inc. was formed on May 1. 2006. The following transactions took place during the first month.

Transactions on May 1:

1. Stockholders invested $120,000 cash in the company in exchange for stock.

2. Hired two employees to work in the warehouse. They will each be paid a salary of $2,000 per month.

3. Signed a 2-year rental agreement on a warehouse; paid $36,000 cash in advance for the first year. (Hint: The portion of the cost related to May 2006 is an expense for this month.)

4. Purchased furniture and equipment costing $70,000. A cash payment of $20,000 was made immediately; the remainder will be paid in 6 months.

5. Paid $3,000 cash for a one-year insurance policy on the furniture and equipment.

(Hint: The portion of the cost related to May 2006 is an expense for this month.)

Transactions during the remainder of the month:

6. Purchased basic office supplies for $1,000 cash. 7. Purchased more office supplies for $3,000 on account. 8. Total revenues earned were $30,000-$10,000 cash and $20,000 on account. 9. Paid $800 to suppliers for accounts payable due. 10. Received $5,000 from customers in payment of accounts receivable. 11. Received utility bills in the amount of $400, to be paid next month. 12. Paid the monthly salaries of the two employees, totalling $4,000.

Instructions

(a) Prepare journal entries to record each of the events listed.

(b) Post the journal entries to T accounts.

(c) Prepare a trial balance as of May 31, 2006.

(d) Prepare an income statement and a retained earnings statement for Chambers Brokerage Services for the month ended May 31, 2006, and a balance sheet as of May 31, 2006.