Chapter 3, Problem 15AP

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 B.

Date	Account titles and Explanation	Debit ($)	Credit ($)
December  1	Cash (A+)	25,000
	Common stock (E+)		25,000
	(To record the issuance of common stock)
December  2	Rent expenses (E-)	1,000
	Cash(A-)		1,000
	(To record  the rent expense)
December  3	Advertising  expense (E-)	750
	Accounts payable (L+)		750
	(To record the purchase of T-shirt on account)
December  4	Accounts payable (L-)	750
	Cash (A-)		750
	(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-)	910
	Cash (A-)		910
	(To record the delivery expense)
December  7	Accounts receivable (A+)	5,300
	Advertising revenue (E+)		5,300
	(To record the advertising revenue)
December  8	Delivery expense (E-)	50
	Cash (A-)		50
	(To record the delivery expense)
December  9	Printing expense(E-)	2,900
	Cash (A-)		2,900
	(To record the printing expense)
December  10	Cash (A+)	2,570
	Wanted Ad revenue (E+)		2,570
	(To record the wanted Ad revenue)
December  11	Utilities expense (E-)	310
	Accounts payable (L+)		310
	(To record the utilities expense)
December  12	Printing expense (E-)	2,900
	Cash (A-)		2,900
	(To record the printing expense)
December  13	Salaries expense (E-)	4,100
	Cash(A-)		4,100
	(To record the salaries expense)
December 14	Accounts receivable (A+)	6,850
	Advertising revenue (E+)		6,850
	(To record the advertising revenue)
December 15	Delivery expense (E-)	930
	Cash (A-)		930
	(To record the delivery expense for bulk mailing)
December 16	Delivery expense (E-)	50
	Cash (A-)		50
	(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+)	1,100
	Notes payable(L+)		1,100
	(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 30th 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.

Company B
Trial Balance
December 31
Accounts	Debit ($)	Credit ($)
Cash	21,880
Accounts receivable	7,050
Office equipment	1,100
Printing  Expense	5,800
Advertising expense	750
utilities expense	310
Salaries expense	4,100
Rent expense	1,000
Delivery expense	1,940
Advertising revenue		12,150
Wanted AD Revenue		5,370
Notes payable		1,100
Accounts payable		310
Common stock		25,000
Total	43,930	43,930

Table (2)

Conclusion

The debit column and credit column of the trial balance are agreed, both having balance of $43,930.

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.

Company B Income statement For the year ended December 31
Details	Amount ($)	Amount ($)
Revenues:
Advertising revenue	12,150
Wanted Ad revenue	5,370
Total revenue		17,520
Less: Expenses
Printing  Expense	5,800
Advertising expense	750
utilities expense	310
Salaries expense	4,100
Rent expense	1,000
Delivery expense	1,940
Total Expenses		(13,900)
Net Income		3,620

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 Company B.

Company B Balance Sheet As on December 31
ASSETS	Amount($)	Amount($)
Current Assets:
Cash	21,880
Account receivable	7,050
Total Current Assets		28,930
Office Equipment		1,100
Total Assets		30,030
LIABILITIES
Accounts payable	310
Notes payable	1,100
Total liabilities		1,410
Stockholders’ equity
Common stock	25,000
Retained earnings	3,620
Total Stockholders’ Equity		28,620
Total Liabilities and Stockholders’ Equity		30,030

Table (4)