3. A1 Corp. was started on August 01, 2009. The following selected events and transactions occurred during August. August 01 Invested $50,000 cash in exchange for common stock August 02 Hired a sales manager at a salary of $2,500 per month August 05 Purchased $2,000 of supplies on account from B2 Corp. August 05 Paid office rent of $1,200 for the month August 10 Billed clients $1,500 for services rendered August 15 Received $5,000 advance for a construction contract August 20 Received cash of $3,000 for services completed August 26 Paid sales manager $2,500 salary for the month August 27 Paid 50% of balance due B2 Corp. A1 Corp. uses the following chart of accounts: No. 101 Cash; No. 112 Accounts Receivable; No. 126 Supplies; No. 201 Accounts Payable; No. 205 Unearned Revenue; No. 311 Common Stock; No. 400 Service Revenue, No. 726 Salaries expense and No. 729 Rent Expense.

Instructions:

i. Journalize the transactions.

ii. Post to the ledger accounts.

iii. Prepare a trial balance on August 31,2009.

Answers

1.

Account Dr. Cr. Account Dr. Cr.

cash Revenue Account Payable Expense SWRckhRldeUV ETXiW\ Inventory Sales Discount Sales Accumulated Depreciation Sales Returns Unearned Revenue Cost of Goods Sold Prepaid Expense Equipment Interest Payable

Note: Sales is used interchangeably with Revenue in accounting (credit account). Sales Returns and Sale Discount are contra revenue accounts to Sales. They are both debit accounts. Cost of goods sold is the total cost of merchandise sold. This is an expense account. Accumulated Depreciation is a negative asset and is a credit account. Unearned revenue should not be confused with other revenue accounts. It is a liability, thus a credit account.

2. Cash Dr. Cr. Jan 01 9,600 Jan 12 2,000 Jan 10 2,800 Jan 31 1,200 Bal. 11,600

Accounts Receivable Dr. Cr. Jan 25 1,650 Jan 31 1,200 Bal. 450

Notes Payable Dr. Cr. Jan 12 2,500 Bal. 2,500

Common Stock Dr. Cr. Jan 01 9,600 Bal. 9,600