Problem 3.6A Short Comprehensive Problem Donegan’s Lawn Care Service began opera

Question

Problem 3.6A
Short Comprehensive Problem

Donegan’s Lawn Care Service began operations in July 2009. The company uses the following general ledger accounts:

Cash Capital stock
Accounts Receivable Retained Earnings
Office Supplies Mowing Revenue
Mowing Equipment Salaries Expense
Accounts Payable Fuel Expense
Notes Payable

The company engaged in the following transactions during its first month of operations:

July 18 Issues 500 shares of capital stock to Patrick Donegan for $1,500.
July 22 Purchased office supplies on account for $100.
July 23 Purchased mowing equipment for $2,000, paying $400 cash and issuing a 60-day note payable for the remaining balance.
July 24 Paid $25 cash for gasoline. All of this fuel will be used in July.
July 25 Billed Lost Creek Cemetery $150 for mowing expenses. The entire amount is due July 30.
July 26 Billed Golf View Condominiums $200 for mowing services. The entire amount is due August 1.
July 30 Collected $150 from Lost Creek Cemetery for mowing services performed on July 25.
July 31 Paid $80 salary to employee Teddy Grimm for work performed in July.


Instructions
a. Record each of the above transactions in general journal form. Include a brief explanation of the transaction as part of each journal entry.
b. Post each entry to the appropriate ledger accounts (use the T account format illustrated in Exhibit 3-8 on page 110).
c. Prepare a trial balance dated July 31, 2009.
d. Explain why the Retained Earnings account has a zero balance in the trial balance.

Explanation / Answer

Trial balance

Particulars

Dr $

Particulars

Cr $

Total

3,550

Total

3550

Date Particulars L/F Dr $ Cr $ 18-Jul Cash 1,500            Capital stock 1,500 (issued 500 shares of capital stock to Patrick Donegan) 22-Jul Office supplies 100             Accounts payable 100 (Purchased office supplies on account)                      23-Jul Equipment 2,000              Cash 400               Notes payable 1,600 (purchased equipment for cash and notes payable) 24-Jul Fuel expenses 25             Cash 25 (cash paid for gasoline)                                                                 25-Jul Accounts receivable 150            Mowing expenses 150 (Billed for mowing expenses)                                             26-Jul Accounts receivable 200            Mowing services 200 (Billed for mowing services)                                       30-Jul Cash 150             Accounts receivable 150 (cash received fro mowing services performed) 31-Jul Salary expense 80              Cash 80 (salary paid to employee)

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