Journalizing transactions, posting journal entries to four-column accounts, and preparing a trial balance

Terrence Murphy opened a law office on January 1, 2018. During the first month of operations, the business completed the following transactions:

Jan. 1 Murphy contributed \(78,000 cash to the business, Terrence Murphy, Attorney. The business issued common stock to Murphy.

3 Purchased office supplies, \)600, and furniture, \(1,700, on account.

4 Performed legal services for a client and received \)1,000 cash.

7 Purchased a building with a market value of \(130,000, and land with a market value of \)25,000. The business paid \(25,000 cash and signed a note payable to the bank for the remaining amount.

11 Prepared legal documents for a client on account, \)400.

15 Paid assistant’s semimonthly salary, \(1,120.

16 Paid for the office supplies purchased on January 3 on account.

18 Received \)2,700 cash for helping a client sell real estate.

19 Defended a client in court and billed the client for \(1,800.

25 Received a bill for utilities, \)600. The bill will be paid next month.

29 Received cash on account, \(1,500.

30 Paid \)1,200 cash for a 12-month insurance policy starting on February 1.

30 Paid assistant’s semimonthly salary, \(1,120.

31 Paid monthly rent expense, \)1,800.

31 Paid cash dividends of $2,200.

Requirements

1. Record each transaction in the journal, using the following account titles: Cash; Accounts Receivable; Office Supplies; Prepaid Insurance; Land; Building; Furniture; Accounts Payable; Utilities Payable; Notes Payable; Common Stock; Dividends; Service Revenue; Salaries Expense; Rent Expense; and Utilities Expense. Explanations are not required.

Step by step solution

01

Step-by-Step SolutionStep 1: Definition of Service Revenue

The service revenue is defined as the amount of money received by the business in exchange for providing services

02

Recording Journal Entries

	Journal entry
Date	Particulars	Debit ($)	Credit ($)
Jan
1	Cash	$78,000
	Common Stock		$78,000
3	Office Supplies	$600
	Furniture	$1,700
	Accounts Payable		$2,300
4	Cash	$1,000
	Service Revenue		$1,000
7	Building	$130,000
	Land	$25,000
	Cash		$25,000
	Notes Payable		$130,000
11	Accounts Receivables	$400
	Service Revenue		$400
15	Salaries Expense	$1,120
	Cash		$1,120
16	Accounts Payable	$600
	Cash		$600
18	Cash	$2,700
	Service Revenue		$2,700
19	Accounts Receivables	$1,800
	Service Revenue		$1,800
25	Utilities Expense	$600
	Utilities Payable		$600
29	Cash	$1,500
	Accounts Receivables		$1,500
30	Prepaid Insurance	$1,200
	Cash		$1,200
30	Salary Expense	$1,120
	Cash		$1,120
31	Rent Expense	$1,800
	Cash		$1,800
31	Dividends	$2,200
	Cash		$2,200

Unlock Step-by-Step Solutions & Ace Your Exams!

• Full Textbook Solutions

  Get detailed explanations and key concepts

• Unlimited Al creation

  Al flashcards, explanations, exams and more...

• Ads-free access

  To over 500 millions flashcards

• Money-back guarantee

  We refund you if you fail your exam.

Start your free trial

Over 30 million students worldwide already upgrade their learning with Vaia!