Explore BrainMass

Chambers Brokerage Journal Entries

P2-3A Journalize transactions, post, and prepare a trial balance and financial statements.
(SO 2, 4, 6, 7)
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 2-year rental agreement on a warehouse; paid $36,000 cash in advance for the first year. (Hint: The portion of the cost related 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 during 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, totalling $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 income statement and a 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

I need the problem completely worked out so that I can get a full understanding. There is another post on the site that has the problem in MS Excel format, but the information was not plugged in correctly. Any help would be highly apprciated.


Solution Preview

See attached for proper formatting

Trans. Account Titles and Explanation Debit Credit
1. Cash 120,000
Chambers, Capital 120,000

2. No entry.

3. Prepaid Rent 33,000
Rent Expense 3,000
Cash 36,000

4. Furniture & 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 ...

Solution Summary

Example journal entries provided based on supplied information.