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

4. Prepare the trial balance of Terrence Murphy, Attorney, at January 31, 2018.

Step by step solution

01

Step-by-Step SolutionStep 1: Definition of Prepaid Expense

The Prepaid Expense is defined as the amount of money paid in advance for the expense which has not been incurred.

02

Preparing the Trial Balance

Terrence Murphy
Trial Balance
January 18, 2018
Account Title	Debit ($)	Credit ($)
Cash	$50,160
Accounts Receivables	$700
Office Supplies	$600
Prepaid Insurance	$1,200
Land	$25,000
Building	$130,000
Furniture	$1,700
Accounts Payable		$2,900
Utilities Payable		$600
Notes Payable		$130,000
Common Stock		$78,000
Dividends	$2,200
Service Revenue		$5,900
Salaries Expense	$2,240
Rent Expense	$1,800
Utilities Expense	$600
Total	$216,200	$216,200

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