Question

Selected accounts from the ledger of Garrison Company appear below. For each account, indicate the following: A) In the first column at the right, indicate the nature of each account, using the following abbreviations:
Asset - A
Revenue - R
Liability - L
Expense - E
None of the above - N
B) In the second column, indicate the increase side of each account by inserting "Dr." for Debit or "Cr." for Credit.
Account Type of account Increase side
1) Supplies
2) Fees Earned
3) Retained Earnings
4) Accounts Payable
5) Salaries Expense
6) Common Stock
7) Accounts Receivable
8) Equipment
9) Notes Payable
Complete the following for Wickers Restoration Services. You will need additional paper for this problem.
A) Record the following selected transactions for May in a two-column journal, identifying each entry by number Explanations may be omitted. Journal format is attached.
B) Prepare T accounts for each account used and post the journal entries to these accounts, placing the appropriate number to the left of each amount to identify the transactions.
C) Prepare an unadjusted trial balance as of May 31.
D) Determine the net income for May.
E) Determine the retained earnings at the end of May, assuming this was the first month of business.
1) Received $48,000 from sale of common stock
2) Paid rent on office for the month, $880
3) Purchased supplies on account, $1,750
4) Earned fees, receiving cash, $12,600
5) Paid creditor on account, $1,000
6) Paid automobile expenses for month, $375, and miscellaneous expenses, $250
7) Paid office salaries for the month, $3,900
8) Eamed fees which the customer will pay next month, $2,400
9) Determined that the cost of supplies used was $280
10) Paid dividends, $2,400

Answer 1

Answer:

Garrison Company

1) Indication of Account Type and Account Increase Side:

Description                         Account Type      Account Increase Side

) Supplies                             A                           Dr.

2) Fees Earned                    R                           Cr.

3) Retained Earnings           N                          Cr.

4) Accounts Payable            L                           Cr.

5) Salaries Expense             E                           Dr.

6) Common Stock                N                          Cr.

7) Accounts Receivable       A                          Dr.

8) Equipment                        A                          Dr.

9) Notes Payable                 L                          Cr.

2A) General Journal

Date  Description              Debit         Credit

1.        Cash                      $48,000

         Common Stock                        $48,000

2.      Rent                         $880

         Cash                                           $880

3.      Supplies                 $1,750

        Accounts Payable                     $1,750

4.      Cash                    $12,600

        Fees Revenue                        $12,600

5.     Accounts Payable  $1,000

       Cash                                          $1,000

6.     Automobile Expenses $375

       Miscellaneous Expense $250

       Cash                                           $625

7.     Office Salaries           $3,900

       Cash                                          $3,900

8.    Accounts Receivable $2,400

      Fees Revenue                          $2,400

9.   Supplies Expenses     $280

     Supplies             ��                         $280

10.  Cash Dividends        $2,400

      Cash                                            $2,400

2B)   T Accounts

                               Cash Account

1. Common Stock      $48,000     2.  Rent                          $880

4. Fees Revenue         12,600      5.  Accounts Payable   1,000

                                                      6.  Automobile Exp.        375

                                                      6.  Miscellaneous Exp.   250

                                                      7.  Office Salaries        3,900

                                                    10.   Dividends               2,400                                                                                                                    

                                                            Balance c/d        $51,795

                                   60,600                                         60,600

Balance b/d               $51,795

                           Common Stock

                                                    1.   Cash                    $48,000

                           Rent Expense

2. Cash                         $880

                          Supplies

3. Accounts Payable    $1,750       9.   Supplies Expense     $280

                                                              Balance c/d          $1,470

                                      1,750                                                1,750

 Balance b/d               $1,470

                         Accounts Payable

5.  Cash                        1,000         3.  Supplies                  $1,750

    Balance c/d                750                                                        

                                     1,750                                                1,750

                                                           Balance b/d                  750

                          Automobile Expenses

6.  Cash                       $375

                          Miscellaneous Expenses

6.  Cash                       $250

                          Salaries Expenses

7.  Cash                   $3,900

                          Fees Revenue

  Balance c/d             15,000        4.   Cash                        $12,600

                                                     8.   Accounts Receivable 2,400

                                  15,000                                                 15,000

                                                            Balance b/d              15,000

                          Accounts Receivable

8.  Fees Revenue    $2,400

                        Supplies Expense

9. Supplies                   $280

                          Dividends

10.  Cash                   $2,400

2C) Trial Balance as of May 31

Description                       Debit         Credit

Cash                             $51,795

Common Stock                                  $48,000

Rent Expense                    880

Supplies                           1,470

Accounts Payable                                     750

Automobile Expenses       375

Miscellaneous Expenses  250

Salaries Expenses          3,900

Fees Revenue                                     15,000

Accounts Receivable     2,400

Supplies Expenses           280

Dividends                       2,400

Total                           $63,750         $63,750

2D) Determination of Net Income for May:

Fees Revenue                                $15,000

Rent Expense                    880

Supplies                           1,470

Automobile Expenses       375

Miscellaneous Expenses  250

Salaries Expenses          3,900

Supplies Expenses           280         $7,155

Net Income                                      $7,845

E) Determination of Retained Earnings:

Net Income             $7,845

Dividends                  2,400

Retained Earnings $5,445

Explanation:

The Supplies Account had been adjusted to produce the Supplies Expenses Account.  This could have been left unadjusted in the Trial Balance, but for simplicity.