P 3–7

Part A

The following transactions occurred during January 2016:

a.

Purchased a truck for $15,000 cash on January 1

b.

Collected snow removal revenue for January, February, and March amounting to $4,000 per month, $12,000 in total (recorded as Service Revenue)

c.

Paid $600 for a one-year insurance policy, effective January 1

d.

Invested $5,000 of temporarily-idle cash in a term deposit (recorded as Short-term Investments)

e.

Purchased $500 of supplies on credit (recorded as Supplies Expense)

f.

Received three months of advertizing revenue amounting to $900 (recorded as Other Revenue)

g.

Received two months of interest amounting to $150 (recorded as Interest Earned)

h.

Paid $5,000 cash for equipment

i.

Received $1,200 cash for January, February, and March rent of unused office space (recorded as Rent Earned)

j.

Paid $3,000 of wages during the month.

Required:

1.

Open general ledger T-accounts for the following: Cash, Short-term Investments, Prepaid Insurance, Equipment, Truck, Accounts Payable, Share Capital, Other Revenue, Interest Earned, Rent Earned, Service Revenue, Supplies Expense, and Wages Expense. General ledger account numbers are not necessary.

2.

Prepare journal entries to record the January transactions. Descriptions are not needed.

3.

Post the entries to the general ledger accounts.

Part B

At the end January, the following adjusting entries are needed:

k.

The truck purchased in transaction a has a useful life of five years.

l.

One-third of the snow removal revenue from transaction b has been earned.

m.

The January portion of the insurance policy has expired.

n.

Half of the interest revenue still has not been earned.

o.

A physical count indicates $200 of supplies is still on hand.

p.

The January component of the advertizing revenue has been earned.

q.

$50 interest for January is accrued on the term deposit; this amount will be included with the interest payment to be received at the end of February.

r.

The equipment purchased in transaction h on January 1 is expected to have a useful life of four years.

s.

January rent revenue has been earned.

t.

Three days of wages amounting to $150 remain unpaid; the amount will be included in the first Friday payment in February.

Required:

4.

Open additional general ledger T-accounts for the following: Interest Receivable, Unused Supplies, Accumulated Depreciation—Equipment, Accumulated Depreciation—Truck, Wages Payable, Unearned Advertizing Revenue, Unearned Fees Revenue, Unearned Interest Revenue, Unearned Rent Revenue, Insurance Expense,

Depreciation Expense—Equipment, and Depreciation Expense—Truck. General ledger account numbers are not necessary.

5.

Prepare all adjusting entries at January 31. Descriptions are not necessary.

6.

Post the entries to the general ledger accounts and post balances.

7.

Prepare an adjusted trial balance at January 31.