Chapter 2, Illustrative Problem 1
Entries into T accounts and trial balance
Daphne Ebert, an interior design consultant, established a professional services corporation known as Daphne Designs, Inc. on August 1 of the current year. During the month, she opened an office and completed the following transactions connected with her professional practice:
Daphne deposited $32,500 drawn on her personal bank account to a business account opened under the name of Daphne’s Designs in exchange for Daphne Designs, Inc. capital stock. b.
Paid January rent for office and showroom, $3,600.
Purchased display cases, shelving, and other showroom equipment for $10,900, paying $3,000 cash and giving a non-interest-bearing note for the remainder. d.
Purchased office furniture on account, $7,800.
Paid cash for office supplies, $1,150.
Paid cash for insurance policies, $1,500.
Received cash from client for design services rendered, $3,700. h.
Paid cash for miscellaneous expenses (postage, car fare, lunch with clients), $120. i.
Paid cash to creditors on account, $2,400.
Paid installment due on note payable, $675.
Received invoice for drafting service, due in February, $420. l.
Recorded fee earned on design services rendered, payment to be received in February, $5,080. m.
Paid salary of assistant, $1,625.
Paid $195 for advertising in January.
Record the foregoing transactions directly in the following T accounts, without journalizing: Cash; Accounts Receivable; Office Supplies; Prepaid Insurance; Showroom Equipment; Office Furniture; Notes Payable; Accounts Payable; Capital Stock; Professional Fees; Rent Expense; Salary Expense; Advertising Expense; Drafting Expense; Miscellaneous Expense. To the left of the amount entered in the accounts, place the appropriate letter to identify the transaction. 2.
Determine the balances of the T accounts having two or more debits or credits. A memorandum balance should be inserted in accounts having both debits and credits, in the manner illustrated in the chapter. For accounts with entries on one side only (such as Professional Fees), there is no need to insert the memorandum balance in the item column. For accounts containing only a single debit and a single credit (such as Notes Payable), the memorandum balance should be inserted in the appropriate item column. Accounts containing a single entry only (such as Prepaid Insurance) do not need a memorandum balance. 3. Prepare a trial balance for Daphne Designs, Inc. as of August 31 of the current year.
Solution to Chapter 2, Illustrative Problem 1
1. and 2.
|Cash | |Office Furniture | |(a) 32,500 |(b) 3,600 | |(d) 7,800 | | |(g) 3,700 |(c) 3,000 | | | |21,935 36,200 |(e) 1,150 | |Notes Payable | | |(f) 1,500 | |( j) 675 |(c) 7,900 | | |(h) 120 | | |7,225 | | |(i) 2,400 | | | | |(j) 675 | |Accounts Payable | | |(m) 1,625 | |(i) 2,400 |(d) 7,800 | | |(n) 195...
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