Question

Schrand Aerobics, Inc., rents studio space (including a sound system) and specializes in offering aerobics classes. On January 1, 2013, its beginning account balances are as follows: Cash, $5,000; Accounts Receivable, $5,200; Equipment, $0; Notes Payable, $2,500; Accounts Payable, $1,000; Common Stock, $5,500; Retained Earnings, $1,200; Services Revenue, $0; Rent Expense, $0; Advertising Expense, $0; Wages Expense, $0; Utilities Expense, $0; Interest Expense, $0.

The following transactions occurred during January.

(1) Paid $600 cash toward accounts payable
(2) Paid $3,600 cash for January rent
(3) Billed clients $11,500 for January classes
(4) Received $500 invoice from supplier for T-shirts given to January class members as an advertising promotion
(5) Collected $10,000 cash from clients previously billed for services rendered
(6) Paid $2,400 cash for employee wages
(7) Received $680 invoice for January utilities expense
(8) Paid $20 cash to bank as January interest on notes payable
(9) Declared and paid $900 cash dividend to stockholders
(10) Paid $4,000 cash on January 31 to purchase sound equipment to replace the rental system

Required:
a. Prepare journal entries for each of the transactions 1 through 10.
b. Set up acounts,including beginning balances,for cach of the accounts used in part a. Post the journal entries to those T-accounts.

Answer 1

Schrand Aerobics, Inc.

a. Journal Entries:

Debit Accounts Payable $600

Credit Cash $600

To record the payment of cash.

Debit Rent $3,600

Credit Cash $3,600

To record the payment of cash.

Debit Accounts Receivable $11,500

Credit Service Revenue $11,500

To record the billing of clients.

Debit Advertising $500

Credit Accounts Payable $500

To record advertising promotion

Debit Cash $10,000

Credit Accounts receivable $10,000

To record the receipt of cash.

Debit Wages $2,400

Credit Cash $2,400

To record the payment of cash

Debit Utilities $680

Credit Accounts Payable $680

To record utilities expense.

Debit Interest $20

Credit Cash $20

To record the payment of interest on notes payable.

Debit Retained Earnings $900

Credit Cash $900

To record the payment of dividends.

Debit Equipment $4,000

Credit Cash $4,000

To record the payment for purchase of sound equipments.

b. T-Accounts:

Cash

Description Debit Credit Balance

Balance $5,000

Accounts payable $600 4,400

Rent 3,600 800

Accounts receivable 10,000 10,800

Wages 2,400 8,400

Interest 20 8,380

Dividend 900 7,480

Equipment 4,000 3,480

Accounts Receivable

Description Debit Credit Balance

Balance $5,200

Service Revenue 11,500 16,700

Cash 10,000 6,700

Equipment

Description Debit Credit Balance

Cash $4,000 $4,000

Notes Payable

Description Debit Credit Balance

Balance $2,500

Accounts Payable

Description Debit Credit Balance

Balance $1,000

Cash $600 400

Advertising $500 900

Utilities 680 1,580

Common Stock

Description Debit Credit Balance

Balance $5,500

Retained Earnings

Description Debit Credit Balance

Balance $1,200

Dividends $900 300

Services Revenue

Description Debit Credit Balance

Accounts receivable $11,500 $11,500

Rent Expense

Description Debit Credit Balance

Cash $3,600 $3,600

Advertising Expense

Description Debit Credit Balance

Accounts payable $500 $500

Wages Expense

Description Debit Credit Balance

Cash $2,400 $2,400

Utilities Expense

Description Debit Credit Balance

Utilities payable $680 $680

Interest Expense

Description Debit Credit Balance

Cash $20 $20

Step-by-step explanation:

Journal entries record the transactions initially with debit and credit to the accounts affected.

The T-accounts is the general ledger accounts where transactions are summarized and a balance for each account is obtained.