Problem 12: Did Salem Open A Law Office On July 1, 2017? ✓ Solved

Oblem 1 2ajudi Salem Opened A Law Office On July 1 2017 On July 31

Judi Salem opened a law office on July 1, 2017. On July 31, the balance sheet showed Cash $5,300, Accounts Receivable $1,900, Supplies $600, Equipment $6,000, Accounts Payable $4,000, and Owner’s Capital $9,800. During August, the following transactions occurred. 1. Collected $1,600 of accounts receivable. 2. Paid $3,000 cash on accounts payable. 3. Recognized revenue of $7,300, of which $1,900 is collected in cash and the balance is due in September. 4. Purchased additional equipment for $1,900, paying $400 in cash and the balance on account. 5. Paid salaries $1,700, rent for August $1,100, and advertising expenses $350. 6. Withdrew $700 in cash for personal use. 7. Received $1,600 from Standard Federal Bank—money borrowed on a note payable. 8. Incurred utility expenses for month on account $270. How do I prepare a tubular analysis?

Sample Paper For Above instruction

To prepare a trial balance from the given transactions of Judi Salem's law office, it is essential to systematically record all financial activities and subsequently compile a list of all ledger accounts with their respective balances. A trial balance serves as a preliminary step to ensure that debits equal credits after posting all transactions. The process entails step-by-step recording of each transaction into the ledger accounts, calculating balances, and finally listing these balances to verify the accounting equation remains balanced.

Step 1: Opening Balances

Starting with the given opening balances on July 31, 2017:

• Cash: $5,300
• Accounts Receivable: $1,900
• Supplies: $600
• Equipment: $6,000
• Accounts Payable: $4,000
• Owner’s Capital: $9,800

These balances are recorded in their respective ledger accounts. The initial trial balance balance sheet thus reflects these starting figures.

Step 2: Recording August Transactions

Now, proceed to detail each transaction and its impact on accounts. For clarity, we categorize transactions into asset, liability, equity, revenue, and expense accounts.

1. Collected $1,600 of accounts receivable

This increases Cash and reduces Accounts Receivable accordingly.

• Debit Cash $1,600
• Credit Accounts Receivable $1,600

2. Paid $3,000 cash on accounts payable

This decreases Cash and Accounts Payable.

• Debit Accounts Payable $3,000
• Credit Cash $3,000

3. Recognized revenue of $7,300, of which $1,900 is collected in cash and the rest on account

Revenues increase Owner’s Equity, with cash received directly and remaining receivable.

• Debit Cash $1,900
• Debit Accounts Receivable $5,400 ($7,300 - $1,900)
• Credit Revenue $7,300

4. Purchased additional equipment for $1,900, paying $400 in cash and the rest on account

This increases Equipment, decreases Cash, and increases Accounts Payable.

• Debit Equipment $1,900
• Credit Cash $400
• Credit Accounts Payable $1,500

5. Paid salaries, rent, and advertising expenses

• Salaries of $1,700:
• Debit Salaries Expense $1,700
• Credit Cash $1,700
• Rent for August $1,100:
• Debit Rent Expense $1,100
• Credit Cash $1,100
• Advertising expenses $350:
• Debit Advertising Expense $350
• Credit Cash $350

6. Withdrew $700 in cash for personal use

This reduces Owner’s Capital and Cash.

• Debit Owner’s Drawings $700
• Credit Cash $700

7. Received $1,600 from Standard Federal Bank—money borrowed on a note payable

This increases Cash and Notes Payable (liability).

• Debit Cash $1,600
• Credit Notes Payable $1,600

8. Incurred utility expenses for month on account $270

This increases Utilities Expense and Accounts Payable.

• Debit Utilities Expense $270
• Credit Accounts Payable $270

Step 3: Calculating Final Balances

After recording all transactions, summing the debits and credits in each ledger account produces the final balances. For example:

• Cash: Initial $5,300 + $1,600 (collection) - $3,000 (pay Accounts Payable) - $400 (Equipment) - $1,700 (Salaries) - $1,100 (Rent) - $350 (Advertising) + $1,600 (Loan):
• Remaining Cash = $5,300 + $1,600 - $3,000 - $400 - $1,700 - $1,100 - $350 + $1,600 = $1,550

Similarly, accounts receivable, supplies, equipment, accounts payable, owner’s capital, and other accounts are tallied according to the transactions above.

Step 4: Preparing the Trial Balance

The trial balance lists each ledger account with its final debit or credit balance. Total debits should equal total credits, confirming the books are balanced. For example, the trial balance might look like:

The total debits and credits should be equal, indicating the books are balanced.

Conclusion

The preparation of a trial balance involves meticulous posting of transactions, calculating account balances, and verifying that the sum of debits equals credits. This process ensures the integrity of financial data and provides a foundation for preparing financial statements, such as the income statement and balance sheet. Proper analysis and accurate recording of each transaction impact the reliability of the financial information and facilitate sound decision-making for Judi Salem's law practice.

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