Problem 2-3B
locombe Services was formed on May 1, 2008. The following
transactions took place during the first month.
Transactions on May 1:
1. Stockholders invested $100,000 cash in the company in
exchange for common stock.
2. Hired two employees to work in the warehouse.They will
each be paid a salary of $3,000 per month.
3. Signed a 2-year rental agreement on a warehouse; paid
$36,000 cash in advance for the first year.
4. Purchased furniture and equipment costing $60,000. A cash
payment of $20,000 was made immediately; the remainder will be paid in 6
months.
5. Paid $3,000 cash for a one-year insurance policy on the
furniture and equipment. Transactions during the remainder of the month:
6. Purchased basic office supplies for $1,000 cash.
7. Purchased more office supplies for $3,000 on account.
8. Total revenues earned were $30,000—$10,000 cash and
$20,000 on account.
9. Paid $800 to suppliers for accounts payable due.
10. Received $5,000 from customers in payment of accounts
receivable.
11. Received utility bills in the amount of $400, to be paid
next month.
12. Paid the monthly salaries of the two employees,
totalling $6,000.
Instructions
(a) Prepare journal entries to record each of the events
listed.
(b) Post the journal entries to T accounts.
(c) Prepare a trial balance as of May 31, 2008.
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