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Question: A friend named Jay Barlow has asked


A friend named Jay Barlow has asked what effect certain transactions will have on his company.Time is short, so you cannot apply the detailed procedures of journalizing and posting. Instead,you must analyze the transactions without the use of a journal. Barlow will continue the businessonly if he can expect to earn monthly net income of at least $5,000. The following transactionsoccurred this month:
a. Barlow deposited $5,000 cash in a business bank account, and the corporation issuedcommon stock to him.
b. Borrowed $5,000 cash from the bank and signed a note payable due within 1 year.
c. Paid $1,300 cash for supplies.
d. Purchased advertising in the local newspaper for cash, $1,800.
e. Purchased office furniture on account, $4,400.
f. Paid the following cash expenses for 1 month: employee salary, $2,000; office rent, $1,200.
g. Earned revenue on account, $7,000.
h. Earned revenue and received $2,500 cash.
i. Collected cash from customers on account, $1,200.
j. Paid on account, $1,000.

Requirements
1. Set up the following T-accounts: Cash, Accounts Receivable, Supplies, Furniture, AccountsPayable, Notes Payable, Common Stock, Service Revenue, Salary Expense, AdvertisingExpense, and Rent Expense.
2. Record the transactions directly in the accounts without using a journal. Key each transactionby letter.
3. Construct a trial balance for Barlow Networks, Inc., at the current date. List expenses with the largest amount first, the next largest amount second, and so on.
4. Compute the amount of net income or net loss for this first month of operations. Why or why not would you recommend that Barlow continue in business?


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2.99

See Answer