Reference no: EM132091032
Question: Analyzing the Effects of Transactions Using T-Accounts and Preparing an Unadjusted Trial Balance Barbara Jones, a textbook editor, opened Barb's Book Fixing on February 1, 2010. The business specializes in editing accounting textbooks. You have been hired as manager. Your duties include maintaining the company's financial records. The following transactions occurred in February 2010, the first month of operations.
a. Received an investment of $16,000 cash from Barbara Jones to establish the sole proprietorship.
b. Paid three months' rent for the office at $800 per month (recorded as Prepaid Rent).
c. Purchased supplies for $300 cash.
d. Negotiated a two-year loan at the bank, depositing $10,000 in the company's bank account.
e. Used all of the money from (d) to purchase a computer for $2,500 and the balance for furniture and fixtures for the office.
f. Placed an advertisement that ran the same day in the local paper for $425 cash.
g. Made sales totaling $1,800; $1,525 was in cash and the rest on accounts receivable.
h. Incurred and paid employee wages of $420.
i. Collected accounts receivable of $50 from customers.
j. Had one of the computers repaired for $120 cash.
k. Barbara Jones withdrew $3,500 cash from the business.
Required: 1. Set up appropriate T-accounts for Cash; Accounts Receivable; Supplies; Prepaid Rent; Equipment; Furniture and Fixtures; Notes Payable; B. Jones, Capital; B. Jones, Drawing; Service Revenue; Advertising Expense; Wages Expense; and Repair Expense. All accounts begin with zero balances.
2. Record in the T-accounts the effects of each transaction for Barb's Book Fixing in February, referencing each transaction in the accounts with the transaction letter. Show the unadjusted ending balances in the T-accounts.
3. Prepare an unadjusted trial balance at the end of February.
4. Refer to the revenues and expenses shown on the unadjusted trial balance. Based on this information, write a short memo to Barbara offering your opinion on the results of operations during the first month of business.