Accounting Question: Analyze, Record Journals and T-accounts, Create Trial Balance

by Injeela Mahbobi
(Kabul)

ASSIGNMENT#2

The following are the transactions of Overnight Auto Service for the month of November 2006:

• Nov 1: McBryan started business by depositing $200,000 in a company bank account.
• Nov 1: Received $2,400 cash in advance for 4 months (rent revenue).
• Nov 1: Paid $3,000 cash in advance for 3 months (salaries expense).
• Nov 2: Purchased an aircraft for $240,000. Made a $60,000 cash down payment and issued a note payable for remaining $180,000.
• Nov 3: Purchased land for $45,000 by paying cash.
• Nov 4: Paid Daily Tribune $500 cash for newspaper advertising to be run during November.
• Nov 5: Purchased radio advertising from KRAM to be aired in November. The cost was $750, payable within 30 days.
• Nov 5: Purchased a building for $64,800 - paying $10,800 in cash and issuing a note payable for the remaining $54,000.
• Nov 6: Purchased various shop supplies cost $2,500, due in 30 days. These supplies are expected to meet Overnight’s needs for three or four months.
• Nov 7: Collected $7,950 cash for repairs made to vehicles.
• Nov 8: McBryan, the owner, withdrew $5,200 cash from the company’s bank account for his personal use.
• Nov 9: McBryan found that he did not need all of the cash he had withdrawn on Nov 8, so he redeposited $2,000 in Overnight’s (business) bank account.
• Nov 10: Paid all employees wages expense of $3,500.
• Nov 11: Paid rent of amount $5,500.
• Nov 12: Purchased tools and equipment on account for $23,800.
• Nov 15: Billed customers $6,320 for services rendered during the 1st half of November.
• Nov 16: Paid $2,400 for maintenance and repair services.

• Nov 17: Collected $6,320 of the amounts billed to customers on November 15.
• Nov 19: Received a fuel bill for $1,500 purchased during November. This amount is due by December 10.
• Nov 20: Sold some of the tools and equipment at the price equal to its cost $2,800. Collectable within 45 days.
• Nov 25: Received $1,200 in partial collection of the accounts receivable from the sale of the tools and equipment.
• Nov 26: Paid $9,800 in partial payment of an account payable for the purchase of tools and equipment.
• Nov 30: Billed Harbor Cab Co. $8,500 for maintenance and repair services rendered during November. The agreement with Harbor Cab calls for payment to be received by December 10.

Data for Adjusting Entries:
(i) Cost of Air Craft = $240,000
Useful life of Aircraft = 20 years
(ii) Cost of Building = $64,800
Useful life of building = 18 years
(iii) Cost of Tools and Equipment = $21,000
Useful life of Tools and Equipment =7 years
(iv) Beginning Shop supplies = $2,500
Ending Shop Supplies = $1,300
(v) Prepaid salaries for 3 months is $3000.
(vi) Unearned rent revenue is $2,400 for 4 months.
(vii) Wages accrued but not recorded at the end of November is $1,200.
(viii) Repair services revenue accrued but not recorded at the end of the month is $2,500.

Required:
I. Analyze these transactions (note down which accounts they will effect).
II. Record these transactions in the journals.
III. Post it into the ledger.
IV. Draw up a trial balance.

NOTE: Assignment must be hand written; no computerized assignment will be acceptable. Due date for submission of assignment is July 15, 2010. (The deadline won’t be relaxed in any case)