You have been requested by a friend named Belinda Nathews to give advice on the effects that
Question:
You have been requested by a friend named Belinda Nathews to give advice on the effects that certain transactions will have on her business. Time is short, so you cannot jour- nalize the transactions. Instead, you must analyze the transactions without the use of a jour- nal. Nathews will continue the business only if she can expect to earn monthly net income of $5,000. The following transactions have occurred during March:
a. Nathews deposited $8,000 cash in a business bank account to start the company.
b. Borrowed $6.000 cash from the bank and signed a note payable due within one year.
c. Paid $300 cash for supplies.
d. Paid cash for advertising in the local newspaper, $700.
e. Paid the following cash expenses for one month: secretary's salary, $1,400; office rent. $800; utilities. $300; interest, $50.
f. Earned service revenue on account. $5,300. g. Earned service revenue and received $3,500 cash. h. Collected cash from customers on account. $1,200. Required 1. Open the following T-accounts: Cash: Accounts Receivable: Supplies: Notes Payable: Belinda Nathews, Capital: Service Revenue: Salary Expense: Rent Expense; Advertising Expense; Utilities Expense: Interest Expense. 2. Record the transactions directly in the accounts without using a journal. Key each trans- action by letter. 3. Prepare a trial balance at March 31, 20X9. List expenses with the largest amount first, the next largest amount second. and so on. The business name is Nathews Apartment Locators. 4. Compute the amount of net income or net loss for this first month of operations. Would you recommend that Nathews continue in business?
Step by Step Answer:
Accounting
ISBN: 9780130906991
5th Edition
Authors: Charles T. Horngren, Walter T. Harrison, Linda S. Bamber, Betsy Willis, Becky Jones