Thrifty Tax Services, Inc. was organized in 2018 to provide tax and accounting s
ID: 2392168 • Letter: T
Question
Thrifty Tax Services, Inc. was organized in 2018 to provide tax and accounting services to small businesses. The following are balance sheet values as of June 1, 2018:
Cash $ 1,400
Accounts receivable 750
Supplies 210
Equipment 8,200
Patent 5,900
Accounts payable 600
Notes payable -0-
Common Stock 2,000
Additional Paid in Capital 12,000
Retained earnings 1,860
Total $16,460 $16,460
Consider the following transactions that occurred during June 2018:
Sold 1,000 shares of $1 par value stock for $10 per share to investors.
Borrowed $7,500 from a local bank signing a promissory note due at the end of two years.
Purchased miscellaneous supplies on account for $350.
Billed a client $2,000 for tax preparation services.
Paid a $650 bill from the local newspaper for advertising for the month of June. The ad appeared in the paper during June.
Received $500 from the client billed in entry (4).
Received cash of $1,400 for services provided in preparing a client’s tax return.
Purchased computer equipment for $4,000 in cash.
Paid $1,650 in salaries and wages for June.
Received and paid the $700 bill for June utilities.
Required
1. Enter beginning balances in T-accounts.
2. Prepare journal entries for each transaction.
3. Post the entries to the T-accounts. Key your entries with the transaction letters used here.
4. Prepare a classified balance sheet for the month ended June 30, 2018. The ending balance in Retained Earnings as of June 30, 2018 (after closing entries) is $2,260.
Explanation / Answer
Journal entries
Transaction
Account Title
Debit
Credit
1
Cash
$ 10,000.00
Common Stock
$ 1,000.00
Additional Paid in Capital
$ 9,000.00
(Common Stock Issued)
2
Cash
$ 7,500.00
Notes Payable
$ 7,500.00
(Loan Received)
3
Supplies
$ 350.00
Accounts Payable
$ 350.00
(supplies Purchased)
4
Accounts Receivable
$ 2,000.00
Fee Earned
$ 2,000.00
(Client Billed)
5
Advertisement Expenses
$ 650.00
Cash
$ 650.00
(Advertisement Expenses Paid)
6
cash
$ 500.00
Accounts Receivable
$ 500.00
(Cash Received against Balance due)
7
Cash
$ 1,400.00
Fee Earned
$ 1,400.00
(being fee earned)
8
Computer Equipment
$ 4,000.00
Cash
$ 4,000.00
(Computer Equipment Purchased)
9
Salary
$ 1,650.00
cash
$ 1,650.00
(being salary paid)
10
Utilities expenses
$ 700.00
cash
$ 700.00
(Payment made against credit balance)
$ 28,750.00
$ 28,750.00
Cash Account
Opening Balance
$ 1,400.00
Computer Equipment
$ 4,000.00
Common Stock
$ 1,000.00
Salary
$ 1,650.00
Additional Paid in Capital
$ 9,000.00
Utilities expenses
$ 700.00
Notes Payable
$ 7,500.00
Advertisement Expenses
$ 650.00
Accounts Receivable
$ 500.00
Closing balance
$ 13,800.00
Fee Earned
$ 1,400.00
$ 20,800.00
$ 20,800.00
Accounts Receibables
Opening Balance
750
Cash
$ 500.00
Fee Earned
$ 2,000.00
Closing balance
$ 2,250.00
$ 2,750.00
$ 2,750.00
Supplies
Opening Balance
210
Closing balance
$ 560.00
Accounts Payable
$ 350.00
$ 560.00
$ 560.00
Equipment
Opening Balance
$ 8,200.00
Closing balance
$ 12,200.00
Cash
$ 4,000.00
$ 12,200.00
$ 12,200.00
Notes Payable
Closing balance
$ 7,500.00
Opening Balance
$ -
Cash
$ 7,500.00
$ 7,500.00
$ 7,500.00
Common Stock
Closing balance
$ 3,000.00
Opening Balance
$ 2,000.00
Cash
$ 1,000.00
$ 3,000.00
$ 3,000.00
Additional Paid In Capital
Closing balance
$ 21,000.00
Opening Balance
$ 12,000.00
Cash
$ 9,000.00
$ 21,000.00
$ 21,000.00
Retained Earnings
Closing balance
$ 2,260.00
Opening Balance
$ 1,860.00
Profit earned
$ 400.00
$ 2,260.00
$ 2,260.00
Fee Earned
Closing balance
$ 3,400.00
Accounts Receivable
$ 2,000.00
Cash
$ 1,400.00
$ 3,400.00
$ 3,400.00
Salary
Cash
$ 1,650.00
Closing balance
$ 1,650.00
$ 1,650.00
$ 1,650.00
Thrifty Tax Services
Balance Sheet
As at 30th June 2018
Assets
Current Assets
Cash
$ 13,800.00
Accounts Receivables
$ 2,250.00
Supplies
$ 560.00
Total Current assets
$ 16,610.00
Equipment
$ 12,200.00
Patient
$ 5,900.00
Total assets
$ 34,710.00
Liabilities and Shareholder's Fund
Liabilities
Current Liabilities
Accounts Payable
$ 950.00
Notes Payable
$ 7,500.00
Total Current Liabilities
$ 8,450.00
Shareholder's Fund
Common Stock
$ 3,000.00
Retained Earning
$ 2,260.00
Additional Paid in Capital
$ 21,000.00
Total Liabilities and Shareholder's Fund
$ 34,710.00
Journal entries
Transaction
Account Title
Debit
Credit
1
Cash
$ 10,000.00
Common Stock
$ 1,000.00
Additional Paid in Capital
$ 9,000.00
(Common Stock Issued)
2
Cash
$ 7,500.00
Notes Payable
$ 7,500.00
(Loan Received)
3
Supplies
$ 350.00
Accounts Payable
$ 350.00
(supplies Purchased)
4
Accounts Receivable
$ 2,000.00
Fee Earned
$ 2,000.00
(Client Billed)
5
Advertisement Expenses
$ 650.00
Cash
$ 650.00
(Advertisement Expenses Paid)
6
cash
$ 500.00
Accounts Receivable
$ 500.00
(Cash Received against Balance due)
7
Cash
$ 1,400.00
Fee Earned
$ 1,400.00
(being fee earned)
8
Computer Equipment
$ 4,000.00
Cash
$ 4,000.00
(Computer Equipment Purchased)
9
Salary
$ 1,650.00
cash
$ 1,650.00
(being salary paid)
10
Utilities expenses
$ 700.00
cash
$ 700.00
(Payment made against credit balance)
$ 28,750.00
$ 28,750.00
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.