Question

If an amount box does not require an entry, leave it blank.

a. In the T accounts, record the following transactions of Potter Pool Services for June, identifying each entry by number:

Potter invested $12,500 cash in the business.
Purchased supplies on account, $6,250.
Paid operating expenses, $5,500.
Billed clients for fees, $7,440.
Received cash from cash clients, $4,700.
Paid creditors on account, $1,400.
Received $3,100 from clients on account.
Withdrew $1,500 cash for personal use.

b. Prepare a trial balance as of June 30 for Potter Pool Servcies.

c. Assuming that supplies expense (which has not been recorded) amounts to $1,500 for June. determine the following:

(1) Net income for the month
(2) Stockholders' equity as of June 30.

Answer 1

a. Record

1.

Cash $12,500 (debit)

Capital $12,500 (credit)

2.

Inventories $6,250 (debit)

Accounts Payable $6,250 (credit)

3.

Operating expenses $5,500 (debit)

Cash $5,500 (credit)

4.

Accounts Receivables $7,440 (debit)

Revenue $7,440 (credit)

5.

Cash $4,700 (debit)

Revenue $4,700 (credit)

6.

Cash $3,100 (debit)

Accounts Receivables $3,100 (credit)

7.

Capital $1,500 (debit)

Cash $1,500 (credit)

b. Trial Balance

Debit Credit

Cash ($12,500-$5,500-$1,500+$3,100+$4,700) $11,500

Capital ($12,500-$1,500) $11,000

Inventories $6,250

Accounts Payable $6,250

Operating expenses $5,500

Accounts Receivables ($7,440 - $3,100 ) $4,340

Revenue ($7,440+$4,700) $12,140

c. (1) Net Income = $5,140

c. (2) Stockholders' equity = $16,140

Step-by-step explanation:

c. (1) Net Income

Income = Revenue - Expenses

= $12,140 - $5,500 - $1,500

= $5,140

c. (2) Stockholders' equity

Stockholders' equity = Capital + Income

= $11,000 + $5,140

= $16,140