Thrifty Tax Services, Inc. was organized in 2018 to provide tax and accounting services to small businesses. The following are balance sheet values as of June 1, 2018:
Cash $ 1,400
Accounts receivable 750
Accounts payable 600
Notes payable -0-
Common Stock 2,000
Additional Paid in Capital 12,000
Retained earnings 1,860
Total $16,460 $16,460
Consider the following transactions that occurred during June 2018:
- Sold 1,000 shares of $1 par value stock for $10 per share to investors.
- Borrowed $7,500 from a local bank signing a promissory note due at the end of two years.
- Purchased miscellaneous supplies on account for $350.
- Billed a client $2,000 for tax preparation services.
- Paid a $650 bill from the local newspaper for advertising for the month of June. The ad appeared in the paper during June.
- Received $500 from the client billed in entry (4).
- Received cash of $1,400 for services provided in preparing a client’s tax return.
- Purchased computer equipment for $4,000 in cash.
- Paid $1,650 in salaries and wages for June.
- Received and paid the $700 bill for June utilities.
1. Enter beginning balances in T-accounts.
2. Prepare journal entries for each transaction.
3. Post the entries to the T-accounts. Key your entries with the transaction letters used here.
4. Prepare classified balance sheet for the month ended June 30, 2018. The ending balance in Retained Earnings as of June 30, 2018 (after closing entries) is $2,260.