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analyzing the effects of transactions using t accounts and preparing an unadjusted t 727127

Analyzing the Effects of Transactions

Using T Accounts and Preparing an Unadjusted Trial Balance

Barbara Jones opened Barb’s Book Business on February 1, 2010. The company specializes in editing accounting textbooks. You have been hired as manager. Your duties include maintaining the company’s financial records. The following transactions occurred in February 2010, the first month of operations.

a. Received shareholders’ cash contributions totaling $16,000 to form the corporation; issued stock.

b. Paid $2,400 cash for three months’ rent for office space.

c. Purchased supplies for $300 cash.

d. Signed a promissory note, payable in two years; deposited $10,000 in the company’s bank account.

e. Used the money from (d) to purchase equipment for $2,500 and furniture and fixtures for $7,500.

f. Placed an advertisement in the local paper for $425 cash.

g. Made sales totaling $1,800; $1,525 was in cash and the rest on accounts receivable.

h. Incurred and paid employee wages of $420.

i. Collected accounts receivable of $50 from customers.

j. Repaired one of the computers for $120 cash.


1. Set up appropriate T accounts for Cash, Accounts Receivable, Supplies, Prepaid Rent,

Equipment, Furniture and Fixtures, Notes Payable, Contributed Capital, Service Revenue, Advertising Expense, Wages Expense, and Repair Expense. All accounts begin with zero balances.

2. Record in the T accounts the effects of each transaction for Barb’s Book Business in February, referencing each transaction in the accounts with the transaction letter. Show the unadjusted ending balances in the T accounts.

3. Prepare an unadjusted trial balance at the end of February.

4. Refer to the revenues and expenses shown on the unadjusted trial balance. Based on this information, write a short memo to Barbara offering your opinion on the results of operations during the first month of business.

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