Schrand Aerobics, Inc., rents studio space (including a sound system) and specializes in offering aerobics classes. On January 1, 2013, its beginning account balances are as follows: Cash, $5,000; Accounts Receivable, $5,200; Equipment, $0; Notes Payable, $2,500; Accounts Payable, $1,000; Common Stock, $5,500; Retained Earnings, $1,200; Services Revenue, $0; Rent Expense, $0; Advertising Expense, $0; Wages Expense, $0; Utilities Expense, $0; Interest Expense, $0. The following transactions occur
Question:
The following transactions occurred during January.
(1) Paid $600 cash toward accounts payable
(2) Paid $3,600 cash for January rent
(3) Billed clients $11,500 for January classes
(4) Received $500 invoice from supplier for T-shirts given to January class members as an advertising promotion
(5) Collected $10,000 cash from clients previously billed for services rendered
(6) Paid $2,400 cash for employee wages
(7) Received $680 invoice for January utilities expense
(8) Paid $20 cash to bank as January interest on notes payable
(9) Declared and paid $900 cash dividend to stockholders
(10) Paid $4,000 cash on January 31 to purchase sound equipment to replace the rental system
Required:
a. Prepare journal entries for each of the transactions 1 through 10.
b. Set up acounts,including beginning balances,for cach of the accounts used in part a. Post the journal entries to those T-accounts.
Answers
Answer:Schrand Aerobics, Inc.a. Journal Entries:Debit Accounts Payable $600Credit Cash $600To record the payment of cash.Debit Rent $3,600Credit Cash $3,600To record the payment of cash.Debit Accounts Receivable $11,500Credit Service Revenue $11,500To record the billing of clients.Debit Advertising $500Credit Accounts Payable $500To record advertising promotionDebit Cash $10,000Credit Accounts receivable $10,000To record the receipt of cash.Debit Wages $2,400Credit Cash $2,400To record the payment of cashDebit Utilities $680Credit Accounts Payable $680To record utilities expense.Debit Interest $20Credit Cash $20To record the payment of interest on notes payable.Debit Retained Earnings $900Credit Cash $900To record the payment of dividends.Debit Equipment $4,000Credit Cash $4,000To record the payment for purchase of sound equipments.b. T-Accounts: CashDescription Debit Credit BalanceBalance $5,000Accounts payable $600 4,400Rent 3,600 800Accounts receivable 10,000 10,800Wages 2,400 8,400Interest 20 8,380Dividend 900 7,480Equipment 4,000 3,480 Accounts ReceivableDescription Debit Credit BalanceBalance $5,200Service Revenue 11,500 16,700Cash 10,000 6,700 EquipmentDescription Debit Credit BalanceCash $4,000 $4,000 Notes PayableDescription Debit Credit BalanceBalance $2,500 Accounts PayableDescription Debit Credit BalanceBalance $1,000Cash $600 400Advertising $500 900Utilities 680 1,580 Common StockDescription Debit Credit BalanceBalance $5,500 Retained EarningsDescription Debit Credit BalanceBalance $1,200Dividends $900 300 Services RevenueDescription Debit Credit BalanceAccounts receivable $11,500 $11,500 Rent ExpenseDescription Debit Credit BalanceCash $3,600 $3,600 Advertising ExpenseDescription Debit Credit BalanceAccounts payable $500 $500 Wages ExpenseDescription Debit Credit BalanceCash $2,400 $2,400 Utilities ExpenseDescription Debit Credit BalanceUtilities payable $680 $680 Interest ExpenseDescription Debit Credit BalanceCash $20 $20Explanation:Journal entries record the transactions initially with debit and credit to the accounts affected.The T-accounts is the general ledger accounts where transactions are summarized and a balance for each account is obtained.