During May, Artisan Stone and Brick laid a stone patio for Louise McCowan for a

Question

During May, Artisan Stone and Brick laid a stone patio for Louise McCowan for a fee of $1200. The job took one full week, and was completed on May 15th. Artisan will be paid on June 1. Artisan's expenses associated with the job are as follows:
1. Decorative stones, $400. These stones were purchased on account on May 5th. They will be paid for on June 5th.
2. Cement, two $10 bags. The bags were purchased and paid for on April 20th.
3. Wages paid to assistants, $200. These wages were paid at the end of the week, May 15th.
In addition, Artisan spends approximately $600 per month, paid on May 1st for rent, utilities, and insurance for its office. (You can group all into one account, office expense.)

1. Record all transactions for the months of April, May and June.
2. Set up T Accounts for all accounts used in journal and determine the ending balance as of June 30
3. 4 column accounting paper and compute Artisan's profit on the job, using the matching principle. Be sure to properly label all items in the calculation. You can follow an Income Statement format.

Explanation / Answer

JOURNAL ENTRY Ref Date Account Debit Credit 2 20 April Raw material expense $20 Cash $20 30 April Office expense $600 Accrued expense $600 1 May Prepaid expense $1,200 Accrued expense $600 Cash $1,800 1 5 May Raw material expense $400 Accounts payable $400 3 15 May Wages expense $200 Cash $200 31 May Office expense $600 Prepaid expense $600 June1 Cash $1,200 Revenue $1,200 June5 Accounts payable $400 Cash $400 30 June Office expense $600 Prepaid expense $600 T- ACCOUNTS CASH Date Account Debit Credit 20 April Raw material expense $20 1 May Office expense $1,800 15 May Wages expense $200 June1 Cash $1,200 June5 Accounts payable $400 Ending Balance $1,220 PREPAID EXPENSE Date Account Debit Credit 1 May Cash $1,200 31 May Office expense $600 30 June Office expense $600 Endingb Balance $0 ACCOUNTS PAYABLE Date Account Debit Credit 5 May Raw material expense $400 June5 Cash $400 Ending Balance $0 ACCRUED EXPENSE Date Account Debit Credit 30 April Office expense $600 1 May Cash $600 Ending Balance $0 RAW MATERIAL EXPENSE Date Account Debit Credit 20 April Cash $20 5 May Accounts payable $400 Ending Balance $420 WAGE EXPENSE Date Account Debit Credit 15 May Cash $200 Ending Balance $200 OFFICE EXPENSE Date Account Debit Credit 30 April Accrued expense $600 31 May Prepaid expense $600 30 June Prepaid expense $600 Ending Balance $1,800 REVENUE June1 Cash $1,200 Artisan's Profit on the job Revenue $1,200 Expenses: Raw Materials $420 Wages $200 Office expense $1,800 Total expenses $2,420 Net Profit/(Loss) on the job ($1,220)

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