MBA Program

Accounting Principles Course

Exercise (4)
SOLUTION

Transactions for Tom Petty Company for the month of October 2022 are presented below.
1 Invested $42,000 cash in the business.
2 Purchased land costing $28,000 for cash.
5 Purchased equipment costing $18,000 for $4,000 cash and the remainder on credit.
10 Purchased supplies on account for $800.
15 Paid $1,200 for a one-year insurance policy.
20 Received $3,500 cash for services performed.
25 Received $4,000 for services to be performed next month.
30 Paid wages to employees for $2,800.
31 Petty withdrew $2,300 cash from the business.

Required:
- Journalize the transactions
- Post to the ledger accounts
- Prepare a trial balance
Journalizing the transactions
Oct 1.
Cash.................................................................... 42,000
Owner’s Capital..........................................................42,000

Oct 2
Land......................................................................28,000
Cash .......................................................................... 28,000

Oct 5
Equipment.............................................................18,000
Cash........................................................................... 4,000
Account Payable....................................................... 14,000

Oct 10
Supplies..................................................................800
Accounts Payable .........................................................800

Oct 15
Prepaid Insurance................................................1,200
Cash ..........................................................................1,200

Oct 20
Cash....................................................................3,500
Services Revenue ......................................................3,500

Oct 25
Cash ................................................................. 4,000
Unearned Service Revenue.........................................4,000

Oct 30
Wages Expense ................................................2,800
Cash...........................................................................2,800

Oct 31
Owner’s Drawings ............................................ 2,300
Cash...........................................................................2,300
Posting transactions to ledger
Cash
1/10 42,000 2/10 28,000
20/10 3,500 5/10 4,000
25/10 4,000 15/10 1,200
30/10 2,800
31/10 2,300
End. Bal. 11,200

Owner’s Capital
1/10 42,000
End. Bal. 42,000

Land
2/10 28,000
End. Bal. 28,000

Equipment
5/10 18,000
End. Bal. 18,000

Accounts Payable
5/10 14,000
10/10 800
End. Bal. 14,800
Supplies
10/10 800
End. Bal. 800

Prepaid Insurance
15/10 1,200
End. Bal. 1,200

Service Revenue
20/10 3,500
End. Bal. 3,500

Unearned Service Revenue

25/10 4,000
End. Bal. 4,000
 Wages Expense
30/10 2,800
End. Bal. 2,800

Owner’s Drawings
31/10 2,300
End. Bal. 2,300

Trial Balance on October 31, 2022

Tom Petty Company
Trial Balance
October 31, 2022
Account Debit Credit
Cash 11,200
Supplies 800
Prepaid Insurance 1,200
Land 28,000
Equipment 18,000
Accounts Payable 14,800
Unearned Service Revenue 4,000
Owner’s Drawings 2,300
Owner’s Capital 42,000
Service Revenue 3,500
Wages Expense 2,800
Total 64,300 64,300