Question

Aracel Engineering completed the following transactions in the month of June.

1. Jenna Aracel, the owner, invested $100,000 cash, office equipment with a value of $5,000, and $60,000 of drafting equipment to launch the company in exchange for common stock.
2. The company purchased land worth $49,000 for an office by paying $6,300 cash and signing a long-term note payable for $42,700.
3. The company purchased a portable building with $55,000 cash and moved it onto the land acquired in b.
4. The company paid $3,000 cash for the premium on an 18-month insurance policy.
5. The company completed and delivered a set of plans for a client and collected $6,200 cash.
6. The company purchased $20,000 of additional drafting equipment by paying $9,500 cash and signing a long-term note payable for $10,500.
7. The company completed $14,000 of engineering services for a client. This amount is to be received in 30 days.
8. The company purchased $1,150 of additional office equipment on credit.
9. The company completed engineering services for $22,000 on credit.
10. The company received a bill for rent of equipment that was used on a recently completed job. The $1,333 rent cost must be paid within 30 days.
11. The company collected $7,000 cash in partial payment from the client described in transaction g.
12. The company paid $1,200 cash for wages to a drafting assistant.
13. The company paid $1,150 cash to settle the account payable created in transaction h.
14. The company paid $925 cash for minor maintenance of its drafting equipment.
15. The company paid $9,480 cash in dividends.
16. The company paid $1,200 cash for wages to a drafting assistant.
17. The company paid $2,500 cash for advertisements on the Web during June.

Required:
1. Prepare general journal entries to record these transactions using the following titles: Cash (101); Accounts Receivable (106); Prepaid Insurance (108); Office Equipment (163); Drafting Equipment (164); Building (170); Land (172); Accounts Payable (201); Notes Payable (250); Common Stock (307); Dividends (319); Engineering Fees Earned (402); Wages Expense (601); Equipment Rental Expense (602); Advertising Expense (603); and Repairs Expense (604).
2. Post the journal entries from part 1 to the ledger accounts.
3. Prepare a trial balance as of the end of June.

Answer 1

Below is a general journal entry:

• June 1:

Debit Cash $100,000

Debit Office Equipment $5,000

Debit Drafting Equipment $60,000

Credit Common Stock $165,000 ([$100,000 + $5,000 + $60,000])

• June 2:

Debit Land $49,000

Credit Cash $6,300

Credit Notes Payable $42,700

• June 3:

Debit Building $55,000

Credit Cash $55,000

• June 4:

Debit Prepaid Insurance $3,000

Credit Cash $3,000

• June 5:

Debit Cash $6,200

Credit Engineering Fees Earned $6,200

• June 6:

Debit Drafting Equipment $20,000

Credit Cash $9,500

Credit Notes Payable $10,500

• June 7:

Debit Accounts Receivable $14,000

Credit Engineering Fees Earned $14,000

• June 8:

Debit Office Equipment $1,150

Credit Accounts Payable $1,150

• June 9:

Debit Accounts Receivable $22,000

Credit Engineering Fees Earned $22,000

• June 10:

Debit Equipment Rental Expense $1,333

Credit Accounts Payable $1,333

• June 11:

Debit Cash $7,000

Credit Accounts Receivable $7,000

• June 12:

Debit Wages Expense $1,200

Credit Cash $1,200

• June 13:

Debit Accounts Payable $1,150

Credit Cash $1,150

• June 14:

Debit Repairs Expense $925

Credit Cash $925

• June 15:

Debit Dividends $9,480

Credit Cash $9,480

• June 16:

Debit Wages Expense $1,200

Credit Cash $1,200

• June 17:

Debit Advertising Expense $2,500

Credit Cash $2,500

The trial balance at the end of June would include the balances of all ledger accounts. On the debit side: Cash would show the remaining balance after all cash transactions, Accounts Receivable would reflect the outstanding amount, Prepaid Insurance would show its remaining balance, Office Equipment, Drafting Equipment, Building, and Land would display their respective values.

On the credit side: Common Stock would remain the same as the initial investment, Notes Payable would show the outstanding balance, Engineering Fees Earned would display the total revenue earned, and Dividends would reflect the amount paid out. The trial balance would provide a snapshot of the company's financial position at the end of June.