P2-63. Recording Transactions in Journal Entries and T-Accounts

Use the information in Problem 2-62 to complete the following requirements. (P2-62 solution below)

REQUIRED

a. Prepare journal entries for each of the transactions 1 through 12.

b. Set up T-accounts for each of the accounts used in part a and post the journal entries to those

T-accounts.

Solution for P2-62

(a) Financial statements effects template:

		Balance sheet										Income Statement
SNo	Transaction	Current Assets	+	Non Current Assets	=	Liabilities	+	Contribution Capital	+	Earned Capital		Revenues	-	Expenses	=	Net Income
1	Issued common stock for 50,000 cash	50,000						50,000
		(Cash)						(equity shares)
2	Paid 4,800 cash for rent	-4,800								-4,800			-	4,800		-4,800
		(Cash)								(Retained earnings)				(Rent expense)
3	Received invoice for 1,600 for entertaining resort owners					1,600				-1,600			-	1,600		-1,600
						(Accounts Payable)				(Retained earnings)				(Entertainment expense)
4	Paid 900 cash for adverstising for June	-900								-900			-	900		-900
		(Cash)								(Retained earnings)				(Advertising Expense)
5	Paid 1,800 cash Insurance Premium for July	0
		(Cash = -1,800 and Prepaid Insurance = +1800)
6	Rendered Flight Services For 22,700 cash	22,700								22,700		22,700				22,700
		(Cash)								(Retained earnings)		(Flight Services Revenue)
7	Billed Client 2,900 for transporting personnel and Billed firms for 13,000 in flight services	15,900								15,900		15,900				15,900
		(Accounts Receivable)								(Retained earnings)		(Flight Services Revenue)
8	Paid 1500 cash to cover accounts payable	-1,500				-1,500
		(Cash)				(Accounts Payable)
9	Received 13,200 on account from clients in transaction 7	0
		(Cash = +13,200 and Accounts receivables = -13,200)
10	Paid 16,000 cash to cover June wages	-16,000								-16,000			-	16,000		-16,000
		(Cash)								(Retained earnings)				(Wages Expense)
11	Received 3,500 invoice for cost of fuel used during June					3,500				-3,500			-	3,500		-3,500
						(Accounts Payable)				(Retained earnings)				(Fuel Expense)
12	Declared and paid a 3,000 cash dividend	-3,000						-3,000
		(Cash)						(Dividend paid)
	Total	62,400	+	0	=	3,600	+	47,000	+	11,800		38,600	-	26,800	=	11,800

(b) Income Statement for the month of June:

Particulars	Description		Amount ($)
Revenue	(22,700+2,900+13,000)		38,600
-Cost of Goods Sold
	Wages Expense	16,000
	Fuel Expense	3,500	-19,500
Gross Profit			19,100
-Operating expenses
	Rent Expense	4,800
	Entertainment Expense	1,600
	Advertising Expense	900	-7,300
+Oerating income			0
-Taxes			0
Net Profit/Income			11,800