After December 31st, M/s Prompt Truck Rental had the following transactions for

Question

After December 31st, M/s Prompt Truck Rental had the following transactions for a short period: Bought office equipment at a cost of $2,700. Paid in cash. Collected $4,000 of accounts receivable. Paid $3,200 of accounts payable. Borrowed $10,000 from a bank. Signed a note payable for that amount. Purchased two trucks for $30,500. Paid $15,000 cash and signed a note payable for the balance. Sold additional stock to investors for $75,000. Instructions: List the December 31st balances of assets, liabilities and owner's equity in tabular form as shown above. Record the effects of each of the six transactions in the preceding tabular order. Show the total for all columns after each transaction.

Explanation / Answer

Here are the adjusting entries decoded. Try setting up table yourself.

a. Subtract 2700 from cash, add 2700 to assets as "office equipment"

b. Add 4000 to asset account "accounts receivable" or "A/R"

c. Remove 3200 from liability account "accounts payable", and subtract 3200 from cash.

d. Add 10000 to cash, increase "accounts payable" by 10000.

e. Subtract 15000 from cash, and increase liability account "note or notes payable" by 15500. Create an asset account called "trucks" for 305000.

f. Add 75000 to cash, increase equity account "common stock" by 75000.

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