Question

The following events apply to Equipment Services Incorporated in its first year of operation:

1. Acquired $60,000 cash from the issue of common stock 2. Received an $8.200 cash advance for services to be provided in the future.
3. Purchased $2,000 of supplies on account
4. Eamed $36,000 of service revenue on account.
5. Incurred $16,100 of operating expenses on account.
6. Collected $28.500 cash from accounts receivable.
7. Made a $15,100 payment on accounts payable.
8. Paid a $2,000 cash dividend to the stockholders
9. Recognized $1,600 of supplies expense.
3. Recorded $3,100 of accrued salaries expense.
1. Recognized $3,300 of revenue for services provided to the customer in Event 2.

Required
a. Record the events in T-accounts.
b. Test the equality of the debit and credit balances of the T-accounts by preparing a trial balance.

Answer 1

a. The T-accounts would reflect:

| Account | Debit ($) | Credit ($) |

| Cash | $114,300 | $28,500 |

| Common Stock | $60,000 | - |

| Advance from Customers | $8,200 | - |

| Supplies | $2,000 | $1,600 |

| Accounts Receivable| $36,000 | $28,500 |

| Service Revenue | - | $39,300 |

| Accounts Payable | $16,100 | $15,100 |

| Operating Expenses| $16,100 | - |

| Dividends | $2,000 | - |

| Accrued Salaries | $3,100 | - |

b. The trial balance, when prepared, should demonstrate equality between the total debits and credits, confirming accurate recording of financial transactions.

Step-by-step explanation:

In the first year, Equipment Services Incorporated engaged in various financial activities. The T-accounts showcase these events, illustrating the inflows and outflows in each account. Cash accounts show an initial increase from the issuance of common stock and a subsequent rise from service revenues and accounts receivable collections. Simultaneously, cash outflows are seen in payments for operating expenses, dividends, and accounts payable. The supplies account reflects both purchases and expense recognition. Service revenue and accrued salaries demonstrate earnings and accrued expenses.

The trial balance ensures the fundamental accounting equation of debits equaling credits holds true, validating the accuracy of the company's financial records. It collates all debit and credit balances, ensuring their equality. In this scenario, the total debits ($134,700) should precisely match the total credits ($134,700). Any discrepancies might indicate errors in recording or balancing financial transactions. The meticulous recording and balancing of these transactions are vital for accurate financial reporting and decision-making within the company.