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1) The GTC Company began operations on April 1. According to its trial balance on April 30, it had prepaid insurance of $3,600, equipment of $28,000, and notes payable of

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Stephanie Jane
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207 views2 pages

Far 1

1) The GTC Company began operations on April 1. According to its trial balance on April 30, it had prepaid insurance of $3,600, equipment of $28,000, and notes payable of

Uploaded by

Stephanie Jane
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Case 1: Real Estate Agency

Oct. 1 Ms. Lea begins business as a real estate agent with a cash investment of P1,500,000.
2 Paid rent, P35,000, on office space.
3 Purchased office equipment for P140,000 on account.
6 Sold a house and lot for Mr. Smith; billed Mr. Smith P220,000 for realty services
performed.
27 Paid P55,000 on the balance related to the transaction of October 3.
30 Received bill for October utilities, P6,500 (not paid at this time).

Requirement: Journalize the transactions. Explanations can be omitted. (6 items x 5 points)

GENERAL JOURNAL
Date Account Titles Debit Credit
Oct. 1 Cash 1,500,00
0
Lea’s, Capital 1,500,000

2 Rent Expense 35,000


Cash 35,000

3 Equipment 140,000
Accounts Payable 140,000

6 Accounts Receivable 220,000


Service Revenue 220,000

27 Accounts Payable 55,000


Cash 55,000

30 Utilities Expense 6,500


Accounts Payable 6,500

Case 2: GTC Company


The GTC Company began operations on April 1. On April 30, the trial balance shows the following balances for
selected accounts.

Prepaid Insurance P 3,600


Equipment 28,000
Notes Payable 20,000
Unearned Service Revenue 4,200
Service Revenue 1,800

Analysis reveals the following additional data.


1. Prepaid insurance is the cost of a 2-year insurance policy, effective April 1.
2. Depreciation on the equipment is P500 per month.
3. The note payable is dated April 1. It is a 6-month, 12% note.
4. Seven (7) customers paid for the company’s 6-month lawn service package of P600 beginning in
April. The company performed services for these customers in April.
5. Lawn services performed for other customers but not recorded on April 30, totaled P1,500.

Requirement: Prepare the adjusting entries for the month of April. Show computations. (5 items x 5

points)
Date Account Titles Debit Credit
Adjusting Entries
Apr. 30 Insurance Expense 150
Prepaid expense 150

30 Depreciation Expense 500


Accumulated Depreciation - Equipment 500

30 Interest Expense 200


Interest Payable 200

30 Unearned Service Revenue 700


Service Revenue 700

30 Accounts Receivable 1,500


Service Revenue 1,500

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