Case:
You have been requested by a friend named Stephanie Bernina to advise her on the effects certain transactions will have on her business. Time is short, so you cannot journalize the transactions. Instead, you must analyze the transactions without a journal. Bernina will continue the business only if she can expect to earn monthly net income of $5,000. The following transactions occurred during March:
a. Bernina deposited $8,000 cash in a business bank account to start the company.
b. Paid $300 cash for supplies.
c. Incurred advertising expense on account, $700.
d. Paid the following cash expenses: secretary's salary, $1,400; office rent, $1,150.
e. Earned service revenue on account, $8,800.
f. Collected cash from customers on account, $1,200.
Required:
1. Open the following T-accounts: Cash; Accounts Receivable; Supplies; Accounts Payable; Stephanie Bernina, Capital; Service Revenue; Salary Expense; Rent Expense; Advertising Expense; Utilities Expense; Interest Expense.
2. Record the transactions directly in the accounts without using a journal. Key each transaction by letter.
3. Prepare a trial balance at March 31, 20X9. List the largest expense first, the next largest second, and so on. The business name is Bernina Travel Planners.
4. Compute the amount of net income or net loss for this first month of operations. Would you recommend that Bernina continue in business?