Redlands begins business this year and has the following transactions: 1. Issued

Question

Redlands begins business this year and has the following transactions:

1.      Issued 15 shares of $1 par value common stock for $4 per share.

2.      Borrowed $50 from a bank at 10% at the beginning of the year.

3.      Purchased equipment at a cost of $40 at the beginning of the year.

4.      Recorded $30 of service revenue. The firm received $20 in cash for the sale and extended credit to the other customers.

5.      Depreciated one-fifth of the cost of the equipment.

6.      Paid both the note and one-year of interest on the amount borrowed in number 2 above.

Trans.

Accounts

Debit

Credit

1

2

3

4

5

6

Post the above entries to the ledger by making a T-account for each account.

Substitute a trial balance to summarize the postings:

Accounts

Debit

Credit

Cash

Common stock

APIC

Note payable

Equipment

Accounts receivable

Revenues

Depreciation expense

Accumulated depreciation

Interest expense

    Totals

Would you please help me with the T-Account? Thanks.

Trans.

Accounts

Debit

Credit

1

2

3

4

5

6

Explanation / Answer

Date Account Tiltles and Explanation Debit ($) Credit ($) 1) Cash a/c ……………………….Dr                   60                   To Common stock a/c 15                   To APIC a/c 45 (Issued 15 shares of $1 par value common stock for $4 per share) 2) Cash a/c ……………………….Dr 50                    To Notes payable 50 (Borrowed $50 from a Cash at 10%) 3) Equipment a/c …………………Dr 40                              To Cash a/c 40 (Purchased equipment at a cost of $40) 4) Cash a/c ……………………….Dr 20 Accounts receivable a/c ……………Dr 10                     To Revenues a/c 30 (Sales of $ 30, $20 cash & $10 credit ) 5) Depreciation a/c …………………….Dr 8                   To Accumulated depreciation a/c 8 (Depreciation for the year) 6) Notes payable a/c …………….Dr 50 Interest a/c ………………………………Dr 5                        To Cash a/c 55 (Repayment of loan with interest) Accounts Debit Credit Cash                 35 Common stock 15 APIC 45 Note payable 0 Equipment 40 Accounts receivable 10 Revenues 30 Depreciation expense 8 Accumulated depreciation 8 Interest expense 5     Totals                 98               98

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