Learning Objectives : Analyze the impact of transactions on business accounts; construct and use a trial balance; measure net income or loss; decide whether to continue a business.
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 business only if he can expect to earn monthly net income of at least $5,000. The following transactions occurred this month:
a. Barlow deposited $5,000 cash in a business bank account, and the corporation issued common 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 one 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.