Question

Green Wave Company plans to own and operate a storage rental facility. For the first month of operations, the company has the following transactions.\begin{array}{ll} \text{1. January 1} & \text{Issue 10,000 shares of common stock in exchange for $42,000 in cash.}\ \text{2. January 5} & \text{Purchase land for $24,000. A note payable is signed for the full amount.}\ \text{3. January 9} & \text{Purchase storage container equipment for $9,000 cash.}\ \text{4. January 12} & \text{Hire three employees for $3,000 per month.}\ \text{5. January 18} & \text{Receive cash of $13,000 in rental fees for the current month.}\ \text{6. January 23} & \text{Purchase office supplies for $3,000 on account.}\ \text{7. January 31} & \text{Pay employees $9,000 for the first month's salaries.}\ \end{array}

Required:
1. Record each transaction. Green Wave uses the following accounts: Cash, Supplies, Land, Equipment, Common Stock, Accounts Payable, Notes Payable, Service Revenue, and Salaries Expense.
2. Post each transaction to T-accounts and compute the ending balance of each account. Since this is the first month of operations, all T-accounts have a beginning balance of zero.
3. After calculating the ending balance of each account, prepare a trial balance.

Answer 1

Required 1. Recording Entries

January 1

Cash $42,000 (debit)

Common Stock $42,000 (credit)

January 5

Land $24,000 (debit)

Note Payable $24,000 (credit)

January 9

Equipment $9,000 (debit)

Cash $9,000 (credit)

January 12

Salaries Expense $9,000 (debit)

Accounts Payable $9,000 (credit)

January 18

Cash $13,000 (debit)

Service Revenue $13,000 (credit)

January 23

Supplies $3,000 (debit)

Accounts Payable $3,000 (credit)

January 31

Accounts Payable $9,000 (debit)

Cash $9,000 (credit)

Required 2. Posting to T- Accounts

Cash = $37,000

Common Stock = $42,000

Land = $24,000

Note Payable = $24,000

Equipment = $9,000

Salaries Expense = $9,000

Accounts Payable = $3,000

Service Revenue = $13,000

Supplies = $3,000

Required 3. Trial Balance

Debit Credit

Cash $37,000

Common Stock $42,000

Land $24,000

Note Payable $24,000

Equipment $9,000

Salaries Expense $9,000

Accounts Payable $3,000

Service Revenue $13,000

Supplies $3,000

Totals $82,000 $82,000

Step-by-step explanation:

Calculation of T- Account Balances :

Cash = $42,000 - $9,000 + $13,000 - $9,000 = $37,000

Common Stock = $42,000

Land = $24,000

Note Payable = $24,000

Equipment = $9,000

Salaries Expense = $9,000

Accounts Payable $9,000 + $3,000 - $9,000 = $3,000

Service Revenue = $13,000

Supplies = $3,000

A trial balance is a list of balances (Debits and Credit) extracted from the ledger T- Accounts