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    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.


    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 Preview

    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 ...

    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