Chapter 3, Problem 13BP

a

To determine

Prepare the necessary journal entries and post to the ledger accounts.

Explanation of Solution

Journal entry: Journal entry is a set of economic events which can be measured in monetary terms. These are recorded chronologically and systematically.

Prepare the journal entries in the books of Corporation A.

Date	Account titles and Explanation	Debit ($)	Credit ($)
December  1	Cash (A+)	60,000
	Common stock (E+)		60,000
	(To record the issuance of common stock)
December  2	Rent expenses (E-)	5,000
	Cash(A-)		5,000
	(To record  the rent expense)
December  3	Advertising  expense (E-)	550
	Accounts payable (L+)		550
	(To record the purchase of T-shirt on account)
December  4	Accounts payable (L-)	350
	Cash (A-)		350
	(To record the accounts payable)
December  5	Cash (A+)	2,800
	Wanted ad revenue (E+)		2,800
	(To record the wanted ad revenue)
December  6	Delivery expense (E-)	710
	Cash (A-)		710
	(To record the delivery expense)
December  7	Accounts receivable (A+)	6,300
	Advertising revenue (E+)		6,300
	(To record the advertising revenue)
December  8	Delivery expense (E-)	70
	Cash (A-)		70
	(To record the delivery expense)
December  9	Printing expense(E-)	3,900
	Cash (A-)		3,900
	(To record the printing expense)
December  10	Cash (A+)	4,570
	Wanted Ad revenue (E+)		4,570
	(To record the wanted Ad revenue)
December  11	Utilities expense (E-)	510
	Accounts payable (L+)		510
	(To record the utilities expense)
December  12	Printing expense (E-)	4,900
	Cash (A-)		4,900
	(To record the printing expense)
December  13	Salaries expense (E-)	6,100
	Cash(A-)		6,100
	(To record the salaries expense)
December 14	Accounts receivable (A+)	8,950
	Advertising revenue (E+)		8,950
	(To record the advertising revenue)
December 15	Delivery expense (E-)	630
	Cash (A-)		630
	(To record the delivery expense for bulk mailing)
December 16	Delivery expense (E-)	60
	Cash (A-)		60
	(To record the delivery expense for courier service)
December 17	Cash(A+)	5,100
	Accounts receivable (A-)		5,100
	(To record the collection of accounts receivable)
December 18	Office equipment (A+)	3,100
	Notes payable(L+)		3,100
	(To record the purchase of office equipment)

Table (1)

T-account:

T-account is the form of the ledger account, where the journal entries are posted to this account. It is referred to as the T-account, because the alignment of the components of the account resembles the capital letter ‘T’.

The components of the T-account are as follows:

a) The title of the account

b) The left or debit side

c) The right or credit side

Prepare the T-accounts:

b.

To determine

Prepare an unadjusted trial balance as of 31^st December.

Explanation of Solution

Trial balance:

Trial balance is the summary of accounts, and their debit and credit balances at a given time.  It is usually prepared at end of the accounting period.  Debit balances are listed in left   column and credit balances are listed in right column.  The totals of debit and credit column should be equal.  Trial balance is useful in the preparation of the financial statements.

Prepare the trial balance as of 31st December.

Corporation A
Trial Balance
December 31
Accounts	Debit ($)	Credit ($)
Cash	50,750
Accounts receivable	10,150
Office equipment	3,100
Printing  Expense	8,800
Advertising expense	550
utilities expense	510
Salaries expense	6,100
Rent expense	5,000
Delivery expense	1,470
Advertising revenue		15,250
Wanted AD Revenue		7,370
Notes payable		3,100
Accounts payable		710
Common stock		60,000
Total	86,430	86,430

Table (2)

Conclusion

The debit column and credit column of the trial balance are agreed, both having balance of $86,430.

c.

To determine

Prepare the income statement for the month of December.

Explanation of Solution

Income statement: The financial statement which reports revenues and expenses from business operations and the result of those operations as net income or net loss for a particular time period is referred to as income statement.

Prepare an income statement for the year ended December 31.

Corporation A
Income statement
For the year ended December 31
Details	Amount ($)	Amount ($)
Revenues:
Advertising revenue	15,250
Wanted Ad revenue	7,370
Total revenue		22,620
Less: Expenses
Printing Expense	8,800
Advertising expense	550
utilities expense	510
Salaries expense	6,100
Rent expense	5,000
Delivery expense	1,470
Total Expenses		22,430
Net Income		190

Table (2)

d.

To determine

Prepare the balance sheet as of December 31.

Explanation of Solution

Balance sheet: This financial statement reports a company’s resources (assets) and claims of creditors (liabilities) and stockholders (stockholders’ equity) over those resources. The resources of the company are assets which include money contributed by stockholders and creditors. Hence, the main elements of the balance sheet are assets, liabilities, and stockholders’ equity.

Prepare a balance sheet of Corporation A.

Corporation A Balance Sheet As on December 31
ASSETS	Amount($)	Amount($)
Current Assets:
Cash	50,750
Account receivable	10,150
Total Current Assets		60,900
Office Equipment		3,100
Total Assets		64,000
LIABILITIES
Accounts payable	710
Notes payable	3,100
Total liabilities		3,810
Stockholders’ equity
Common stock	60,000
Retained earnings	190
Total Stockholders’ Equity		60,190
Total Liabilities and Stockholders’ Equity		64,000

Table (4)