Question

Green Wave Company plans to own and operate a storage rental facility. For the first month of operations, the company has the following transactions.
1. January 1 Issue 10,000 shares of common stock in exchange for $42,000 in cash.
2. January 5 Purchase land for $24,000. A note payable is signed for the full amount.
3. January 9 Purchase storage container equipment for $9,000 cash.
4. January 12 Hire three employees for $3,000 per month.
5. January 18 Receive cash of $13,000 in rental fees for the current month.
6. January 23 Purchase office supplies for $3,000 on account.
7. January 31 Pay employees $9,000 for the first month’s salaries.
Required:
1. Record each transaction. Green Wave uses the following accounts: Cash, Supplies, Land, Equipment, Common Stock, Accounts Payable, Notes Payable, Service Revenue, and Salaries Expense.
2. Post each transaction to T-accounts and compute the ending balance of each account. Since this is the first month of operations, all T-accounts have a beginning balance of zero.
3. After calculating the ending balance of each account, prepare a trial balance.

Answer 1

Answer:

Required 1 : Recording

January 1

Cash $42,000 (debit)

Common Stock $42,000 (credit)

January 5

Land $24,000 (debit)

Note Payable $24,000 (credit)

January 9

Equipment $9,000 (debit)

Cash $9,000 (credit)

January 12

Salaries Expense $9,000 (debit)

Accounts Payable $9,000 (credit)

January 18

Cash $13,000 (debit)

Service Revenue $13,000 (credit)

January 23

Supplies $3,000 (debit)

Accounts Payable $3,000 (credit)

January 31

Accounts Payable $9,000 (debit)

Cash $9,000 (credit)

Required 2 : T - Accounts

Cash Account

Debit :

Common Stock             $42,000

Service Revenue           $13,000

Totals                            $55,000

Credit :

Equipment                      $9,000

Salaries Payable            $9,000

Balance c/ d                 $37,000

Totals                            $55,000

Common Stock Account

Debit :

Balance c/d                  $42,000

Totals                            $42,000

Credit :

Cash                              $42,000

Totals                            $42,000

Land Account

Debit :

Note Payable               $24,000

Totals                            $24,000

Credit :

Balance c/d                  $24,000

Totals                            $24,000

Note Payable Account

Debit :

Balance c/d                  $24,000

Totals                            $24,000

Credit :

Land                              $24,000

Totals                            $24,000

Equipment Account

Debit :

Cash                               $9,000

Totals                              $9,000

Credit :

Balance c/d                    $9,000

Totals                              $9,000

Accounts Payable Account

Debit :

Cash                               $9,000

Balance c/d                    $3,000

Totals                            $12,000

Credit :

Salaries Expense           $9,000

Supplies                          $3,000

Totals                             $12,000

Salaries Expense Account

Debit :

Accounts Payable         $9,000

Totals                              $9,000

Credit :

Balance c/d                    $9,000

Totals                              $9,000

Supplies Account

Debit :

Accounts Payable          $3,000

Totals                              $3,000

Credit :

Balance c/d                    $3,000

Totals                              $3,000

Service Revenue Account

Debit :

Balance c/d                  $13,000

Totals                            $13,000

Credit :

Cash                              $13,000

Totals                            $13,000

Required 3 : Trial Balance

                                 Debit            Credit

Cash Account        $37,000

Common Stock                           $42,000

Land                       $24,000

Note Payable                              $24,000

Equipment              $9,000

Accounts Payable                        $3,000

Salaries Expense   $9,000

Supplies                  $3,000

Service Revenue                          $13,000

Totals                     $82,000        $82,000

Explanation:

Transactions are first recorded in the Journals, then posted to T - Accounts. The T - Account Balances are used to construct the Trial Balance.