# 2.17: Problems

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Problem A The transactions of Lightning Package Delivery Company for March 2010 follow:

Mar. 1 The company was organized and issued capital stock for USD 300,000 cash.

2 Paid USD 6,000 as the rent for March on a completely furnished building.

5 Paid cash for delivery trucks, USD 180,000.

6 Paid USD 4,000 as the rent for March on two forklift trucks.

9 Paid USD 2,200 for supplies received and used in March.

12 Performed delivery services for customers who promised to pay USD 27,000 at a later date.

20 Collected cash of USD 4,500 from customers on account (see March 12 entry).

21 Received a bill for USD 1,200 for advertising in the local newspaper in March.

27 Paid cash for gas and oil consumed in March, USD 450.

31 Paid USD 2,400 salaries to employees for March.

31 Received an order for services at USD 12,000. The services will be performed in April.

31 Paid cash dividend, USD 1,000.

Prepare the journal entries required to record these transactions in the general journal of the company.

Problem B Economy Laundry Company had the following transactions in August 2010:

Aug. 1 Issued capital stock for cash, USD 150,000.

3 Borrowed USD 40,000 from the bank on a note.

4 Purchased cleaning equipment for USD 25,000 cash.

6 Performed services for customers who promised to pay later, USD 16,000.

7 Paid this month's rent on a building, USD 2,800.

10 Collections were made for the services performed on August 6, USD 3,200.

14 Supplies were purchased on account for use this month, USD 3,000.

17 A bill for USD 400 was received for utilities for this month.

25 Laundry services were performed for customers who paid immediately, USD 22,000.

31 Paid employee salaries, USD 6,000.

31 Paid cash dividend, USD 2,000.

a. Prepare journal entries for these transactions.

b. Post the journal entries to T-accounts. Enter the account number in the Posting Reference column of the journal as you post each amount. Use the following account numbers:

 Acct. No. Account Title 100 Cash 103 Accounts receivable 170 Equipment 200 Accounts payable 201 Notes payable 300 Capital stock 320 Dividends 400 Service revenue 507 Salaries expense 511 Utilities expense 515 Rent expense 518 Supplies expense

c. Prepare a trial balance as of 2010 August 31.

Problem C Clean-Sweep Janitorial, Inc., a company providing janitorial services, was organized 2010 July 1. The following account numbers and titles constitute the chart of accounts for the company:

 Acct. No. Account Title 100 Cash 103 Accounts receivable 150 Trucks 160 Office equipment 170 Equipment 200 Accounts payable 201 Notes payable 300 Capital stock 310 Retained earnings 320 Dividends 400 Service revenue 506 Gas and oil expense 507 Salaries expense 511 Utilities expense 512 Insurance expense 515 Rent expense 518 Supplies expense

July 1 The company issued USD 600,000 of capital stock for cash.

5 Office space was rented for July, and USD 5,000 was paid for the rental.

8 Desks and chairs were purchased for the office on account, USD 28,800.

10 Equipment was purchased for USD 50,000; a note was given, to be paid in 30 days.

15 Purchased trucks for USD 150,000, paying USD 120,000 cash and giving a 60-day note to the dealer for USD 30,000.

23 Received USD 17,280 cash as service revenue.

27 Insurance expense for July was paid, USD 4,500.

30 Paid for gasoline and oil used by the truck in July, USD 576.

31 Billed customers for janitorial services rendered, USD 40,320.

31 Paid salaries for July, USD 51,840.

31 Paid utilities bills for July, USD 5,280.

31 Paid cash dividends, USD 9,600.

a. Prepare general ledger accounts for all of these accounts except Retained Earnings. The Retained Earnings account has a beginning balance of zero and maintains this balance throughout the period.

b. Journalize the transactions given for July 2010 in the general journal.

c. Post the journal entries to ledger accounts.

d. Prepare a trial balance as of 2010 July 31.

Problem D Trim Lawn, Inc., is a lawn care company. Thus, the company earns its revenue from sending its trucks to customers' residences and certain commercial establishments to care for lawns and shrubbery. Trim Lawn's trial balance at the end of the first 11 months of the year follows:

 TRIM LAWN, INC. Trial Balance 2010 November 30 Acct. No. Account Title Debits Credits 100 Cash $63,740 103 Accounts Receivable 88,600 150 Trucks 102,900 160 Office Furniture 8,400 200 Accounts Payable$ 33,600 300 Capital Stock 30,000 310 Retained Earnings, 2010 January 1 30,540 400 Service Revenue 371,010 505 Advertising Expense 18,300 506 Gas an d Oil Expense 21,900 507 Salaries Expense 65,850 511 Utilities Expense 2,310 515 Rent Expense 15,000 518 Supplies Expense 75,600 531 Entertainment Expense 2,550 $465,150$465,150

Dec. 2 Paid rent for December, USD 3,000.

5 Paid the accounts payable of USD 33,600.

8 Paid advertising for December, USD 1,500.

10 Purchased a new office desk on account, USD 1,050.

13 Purchased USD 240 of supplies on account for use in December.

15 Collected cash from customers on account, USD 75,000.

20 Paid for customer entertainment, USD 450.

24 Collected an additional USD 6,000 from customers on account.

26 Paid for gasoline used in the trucks in December, USD 270.

28 Billed customers for services rendered, USD 79,500.

30 Paid for more December supplies, USD 12,000.

31 Paid December salaries, USD 15,300.

31 Paid a USD 4,000 cash dividend. (The Dividends account is No. 320.)

a. Open three-column general ledger accounts for each of the accounts in the trial balance under the date of 2010 December 1. Place the word Balance in the explanation space of each account. Also open an account for Dividends, No. 320.

b. Prepare entries in the general journal for the preceding transactions for December 2010.

c. Post the journal entries to three-column general ledger accounts.

d. Prepare a trial balance as of 2010 December 31.

Problem E Marc Miller prepared the following trial balance from the ledger of the Quick-Fix TV Repair Company. The trial balance did not balance.

 QUICK-FIX REPAIR COMPANY Trial Balance 2010 December 31 Acct. No. Account Title Debits Credits 100 Cash $69,200 103 Accounts Receivable 60,800 160 Office Furniture 120,000 172 Office Equipment 48,000 200 Accounts Payable$ 32,400 300 Capital Stock 180,000 310 Retained Earnings 80,000 320 Dividends 28,800 400 Service Revenue 360,000 507 Salaries Expense 280,000 515 Rent Expense 40,000 568 Miscellaneous Expense 7,200 $654,000$652,400

The difference in totals in the trial balance caused Miller to carefully examine the company's accounting records. In searching back through the accounting records, Miller found that the following errors had been made:

• One entire entry that included a USD 10,000 debit to Cash and a USD 10,000 credit to Accounts Receivable was never posted.

• In computing the balance of the Accounts Payable account, a credit of USD 3,200 was omitted from the computation.

• In preparing the trial balance, the Retained Earnings account balance was shown as USD 80,000. The ledger account has the balance at its correct amount of USD 83,200.

• One debit of USD 2,400 to the Dividends account was posted as a credit to that account.

• Office equipment of USD 12,000 was debited to Office Furniture when purchased.

Prepare a corrected trial balance for the Quick-Fix TV Repair Company as of 2010 December 31. Also, write a description of the effect(s) of each error.

2.17: Problems is shared under a not declared license and was authored, remixed, and/or curated by LibreTexts.