EXERCISE 1

In March 2021, Ana Cruz organized a corporation to provide transportation services. The company, called Cruz S.L., began operations immediately. Transactions during the month of March were as follows.

Mar. 2 The corporation issued 40,000 shares of capital stock to Ana Cruz in exchange for 80,000 cash.

Mar. 4 Purchased a truck for 45,000. Made a 15,000 cash down payment and issued a note payable for the remaining balance.

Mar. 5 Paid 2,500 to rent office space for the month.

Mar. 12 Paid 900 for maintenance and repair services on the company truck.

Mar. 15 Billed customers 25,700 for services performed.

Mar. 25 Collected 12,850 from customers billed on Mar. 15.

Mar. 29 Paid 14,600 in salaries earned by employees during the month.

Mar. 30 Received an 830 bill for fuel used in March. The entire amount is due by April 15.

Mar. 31 Declared a 1,200 dividend that will be paid on April 30.

Instructions:

(1) Record the transactions to the general journal below. (20 points) Hint: use the same account titles here as given in part (2) for general ledger accounts.

(2) Post the transactions to the appropriate general ledger accounts below. Calculate and show the ending balance for each account. (20 points)

- cash

- accounts receivable

-truck

-accounts payables

- notes payables

- dividends payables

- capital stock

- service revenue

- dividends

- maintenence expense

- rent expense

- fuel expense

- salaries expense

(3) Prepare a trial balance dated March 31. (10 points)

(4) What is the purpose of a journal and its relationship to the ledger? Explain. (5 points)

(5) Explain how revenue and expense transactions are recorded in an accounting system. (5 points)

(6) The accounting system of most businesses, whether manual or computer-based, is some form of a double-entry system of accounting. What is meant by the term "double-entry accounting"? Explain. (5 points)

(7) List some of the more analytical functions performed by professional accountants. (5 points)