Chambers Brokerage Services
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Chambers Brokerage Services, Inc was formed on May 1, 2006. The following transactions took place during the first month.
Transactions on May 1:
1. Stockholders invested $120,000 cash in the company in exchange for stock.
2. Hired two employees to work in the warehouse. They will each be paid a salary of $2,000 per month.
3. Signed a two-year rental agreement on a warehouse; paid $36,000 cash in advance for the first year. (Hint: the portion of the cost to May 2006 is an expense for this month.
4. Purchased furniture and equipment costing $70,000. A cash payment of $20,000 was made immediately; the remainder will be paid in 6 months.
5. Paid $3,000 cash for a one-year insurance policy on the furniture and equipment. (Hint: the portion of the cost related to May 2006 is an expense for this month.
Transactions for the remainder of the month:
6. Purchased basic office supplies for $1,000 cash.
7. Purchased more office supplies for $3,000 on account.
8. Total revenues earned were $30,000 - $10,000 cash and $20,000 on account.
9. Paid $800 to suppliers for accounts payable due.
10. Received $5,000 from customers in payment of accounts receivable.
11. Received utility bills in the amount of $400, to be paid next month.
12. Paid the monthly salaries of the two employees ; totaling $4,000.
Instructions:
a. Prepare journal entries to record each of the events listed.
b. Post the journal entries to T Accounts.
c. Prepare a trial balance as of May 31, 2006.
d. Prepare an interest statement and retained earnings statement for Chambers Brokerage Services for the month ended May 31, 2006, and a balance sheet as of May 31,2006.
Trial balance totals $202,600
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Solution Summary
The solution explains the journal entries to be made, posting to accounts, prepration of a trial balance and the preparation of income statement
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Please see the attached file.
(a) General Journal
Tr. No. Account Debit Credit
1 Cash 120,000
Stockholders Equity 120,000
2 No entry for hiring employees. Only when we pay we will record
3 Rent Expense 3,000 For May we record the expense
Prepaid Rent 33,000
Cash 36,000
4 Furniture and Equipment 70,000
Cash 20,000
Accounts Payable 50,000
5 Prepaid Insurance 2,750
Insurance Expense 250
Cash 3,000
6 Office Supplies 1,000
Cash 1,000
7 Office Supplies 3,000
Accounts Payable 3,000
8 Cash 10,000
Accounts Receivable 20,000
Brokerage Revenue 30,000
9 Accounts Payable 800
Cash 800
10 Cash 5,000
Accounts Receivable 5,000
11 Utility Expense 400
Accounts ...
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