Trial Balance
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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.
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Solution Summary
The solution explains how to prepare a trial balance by incorporating the given transactions.
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 ...
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