Chapter 3, Problem 5PA

The accountant for the firm owned by Randy Guttery prepares financial statements at the end of each month.

INSTRUCTIONS

Use the figures in the T accounts for Problem 3.4A to prepare a trial balance, an income statement, a statement of owner’s equity, and a balance sheet. (The first line of the statement headings should read “Randy Guttery, Landscape Consultant.”) Assume that the transactions took place during the month ended June 30, 2019. Determine the account balances before you start work on the financial statements. Analyze: What is the change in owner’s equity for the month of June?

The following accounts and transactions are for Randy Guttery, Landscape Consultant.

INSTRUCTIONS

Analyze the transactions. Record each in the appropriate T accounts. Use plus and minus signs in front of the amounts to show the increases and decreases. Identify each entry in the T accounts by writing the letter of the transaction next to the entry.

ASSETS

Cash

Accounts Receivable

Office Furniture

Office Equipment

LIABILITIES

Accounts Payable

OWNER’S EQUITY

Randy Guttery, Capital

Randy Guttery, Drawing

REVENUE

Fees Income

EXPENSES

Rent Expense

Utilities Expense

Salaries Expense

Telephone Expense

Miscellaneous Expense

TRANSACTIONS

1. a. Guttery invested $80,000 in cash to start the business.
2. b. Paid $3,000 for the current month’s rent.
3. c. Bought office furniture for $8,360 in cash.
4. d. Performed services for $4.100 in cash.
5. e. Paid $625 for the monthly telephone bill.
6. f. Performed services for $7,000 on credit.
7. g. Purchased a computer and copier for $19,000; paid $6,500 in cash immediately with the balance due in 30 days.
8. h. Received $3,500 from credit clients.
9. i. Paid $2,000 in cash for office cleaning services for the month.
10. j. Purchased additional office chairs for $2,900; received credit terms of 30 days.
11. k. Purchased office equipment for $20,000 and paid half of this amount in cash immediately; the balance is due in 30 days.
12. l. Issued a check for $4,700 to pay salaries.
13. m. Performed services for $7,250 in cash.
14. n. Performed services for $8,000 on credit.
15. o. Collected $4,000 on accounts receivable from charge customers.
16. p. Issued a check for $1,450 in partial payment of the amount owed for office chairs.
17. q. Paid $350 to a duplicating company for photocopy work performed during the month.
18. r. Paid $610 for the monthly electric bill.
19. s. Guttery withdrew $4,500 in cash for personal expenses.

Analyze: What liabilities does the business have after all transactions have been recorded?