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Trial Balance

ABC Inc., a retailer, had the following account balances as of April 30, 2006:
Cash . . . . . . . . $ 5,050
Accounts Receivable . .2,450
Inventory . . . . . . .8,000
Land . . . . . . . . .13,000
Building . . . . . . .12,000
Furniture . . . . . . .2,000
Notes Payable . . . . . . . . . . . . . . $12,500
Accounts Payable . . . . . . . . . . . . . .6,000
Capital Stock . . . . . . . . . . . . . . .15,000
Retained Earnings . . . . . . . . . . . . . 9,000
Totals . . . . . . . .$42,500 $42,500

During May, the company completed the following transactions.
May 3 Paid one-half of 4/30/06 accounts payable.
4 Purchased inventory on account, $5,000.
6 Collected all of 4/30/06 accounts receivable.
7 Sold inventory costing $3,850 for $3,000 cash and $2,000 on account.
8 Sold one-half of the land for $6,500, receiving $4,000 cash plus a note for $2,500.
15 Paid installment of $2,500 on notes payable (entire amount reduces the liability account).
21 Issued additional capital stock for $1,000 cash.
23 Sold inventory costing $2,000 for $3,750 cash.
25 Paid salaries of $1,000.
26 Paid rent of $250.
29 Purchased desk for $250 cash.

Prepare a trial balance as of May 31, 2006.

Solution Preview

In order to make a new trial balance, we will see the effect of each of these transactions on the given balances

May 3 Paid one-half of 4/30/06 accounts payable.
This would reduce cash and accounts payable by 3,000.
Cash = 2,050 and Accounts Payable = 3,000

4 Purchased inventory on account, $5,000.
This would increase inventory and accounts payable by 5,000
Inventory = 13,000 and Accounts Payable = 8,000 (balance 3,000 on May 3)

6 Collected all of 4/30/06 accounts receivable.
This would increase cash and reduce receivables by 2,450
Cash = 2,050+2,450=4,500 and Accounts Receivable = 0

7 Sold inventory costing $3,850 for $3,000 cash and $2,000 on account.
This increase cash by 3,000, Accounts Receivable by 2,000, reduce inventory by 3,850 and increase sales by 5,000 and cost of goods sold by 3,850. The ...

Solution Summary

The solution explains how to prepare a trial balance by incorporating the given transactions.

$2.19