Your friend, Dean McChesney, requested that you advise him on the effects that certain transactions will have on his business, A-Plus Travel Planners; Time is short, so you cannot journalize the transactions. Instead, you must analyze the transactions without a journal. McChesney will continue the business only if he can expect to earn a monthly net income of $6,000. The business completed the following transactions during June: McChesney deposited $10,000 cash in a business bank account to start the company. The company issued common stock to McChesney. Paid $300 cash for office supplies. Incurred advertising expense on account, $700. Paid the following cash expenses: administrative assistant’s salary, $1,400; office rent, $1,000. Earned service revenue on account, $8,800. Collected cash from customers on account, $1,200. Requirements Open the following T-accounts: Cash; Accounts Receivable; Office Supplies; Accounts Payable; Common Stock; Service Revenue; Salaries Expense; Rent Expense; and Advertising Expense. Post the transactions directly to the accounts without using a journal. Record each transaction by letter. Calculate account balances. Prepare a trial balance at June 30, 2018. Compute the amount of net income or net loss for this first month of operations. Would you recommend that McChesney continue in business?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Your friend, Dean McChesney, requested that you advise him on the effects that certain transactions will have on his business, A-Plus Travel Planners; Time is short, so you cannot journalize the transactions. Instead, you must analyze the transactions without a journal. McChesney will continue the business only if he can expect to earn a monthly net income of $6,000. The business completed the following transactions during June:

McChesney deposited $10,000 cash in a business bank account to start the company. The company issued common stock to McChesney.
Paid $300 cash for office supplies.
Incurred advertising expense on account, $700.
Paid the following cash expenses: administrative assistant’s salary, $1,400; office rent, $1,000.
Earned service revenue on account, $8,800.
Collected cash from customers on account, $1,200.

Requirements

Open the following T-accounts: Cash; Accounts Receivable; Office Supplies; Accounts Payable; Common Stock; Service Revenue; Salaries Expense; Rent Expense; and Advertising Expense.
Post the transactions directly to the accounts without using a journal. Record each transaction by letter. Calculate account balances.
Prepare a trial balance at June 30, 2018.
Compute the amount of net income or net loss for this first month of operations. Would you recommend that McChesney continue in business?

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