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Alternate Demonstration Problem
Chapter Two
Record the following transactions of Speedy Computer Service, owned by
Bill Smith, for the month of March 2015.
March 1. Bill Smith invested $3,000 cash in his business.
15. Bill provided services and received cash amounting to $5,400
from customers.
16. Purchased supplies on account, $100.
17. Paid for gas and oil, $800.
18. Paid salaries, 5,000.
21. Provided service on credit, $600.
28. Bill provided services and received cash amounting to $6,000.
29. Paid for truck and equipment rental, $2,500.
30. Bill withdrew $2,000 for personal use.
Required:
1. Record the above transactions in general journal form.
2. Prepare a trial balance after posting the entries to t-accounts (you
can make your own t-accounts).
3. prepare an income statement from trial balance
4. Prepare a statement of stockholders’ equity from the trial balance and
income statement
5. Prepare a balance sheet using the trial balance totals and the
statement of owner’s equity
Explain why the company’s cash balance does not agree with net
income.
Solution: Alternate Demonstration Problem
Chapter Two
GENERAL JOURNAL
DATE ACCOUNT TITLES AND
EXPLANATION
P.R. DEBIT CREDIT
March 1 Cash 3 0 0 0 00
Bill Smith, Capital 3 0 0 0 00
15 Cash 5 4 0 0 00
Service Fees Earned 5 4 0 0 00
16 Supplies 1 0 0 00
Accounts Payable 1 0 0 00
17 Gas and Oil Expense 8 0 0 00
Cash 8 0 0 00
18 Salaries Expense 5 0 0 0 00
Cash 5 0 0 0 00
21 Accounts Receivable 6 0 0 00
Service Fees Earned 6 0 0 00
28 Cash 6 0 0 0 00
Service Fees Earned 6 0 0 0 00
29 Equipment Rental Expense 2 5 0 0 00
Cash 2 5 0 0 00
30 B. Smith, Withdrawals 2 0 0 0 00
Cash 2 0 0 0 00
Speedy Computer Service
Trial Balance
March 31, 2015
Cash 4 1 0 0 00
Accounts Receivable 6 0 0 00
Supplies 1 0 0 00
Accounts Payable 1 0 0 00
B. Smith, Capital 3 0 0 0 00
B. Smith, Withdrawals 2 0 0 0 00
Service Fees Earned 1 2 0 0 0 00
Gas & Oil Expense 8 0 0 00
Equipment Rental Expense 2 5 0 0 00
Salaries Expense 5 0 0 0 00
Totals 1 5 1 0 0 00 1 5 1 0 0 00
3. Speedy Computer Service
Income Statement
For the month ended March 31, 2015
Fees Earned............................................................. $12,000
Expenses:
Equipment Rental Expense............................... $2,500
Gas & Oil Expense............................................. 800
Salary Expense.................................................. 5,000
Total expenses................................................... 8,300
Net income............................................................... $ 3,700
4. Speedy Computer Service
Statement of Owner’s Equity
For the month ended March 31, 2015
Beginning Capital $0
Add: Investments $3,000
Net Income 3,700 6,700
Total 6,700
Less: Owner Withdrawal 2,000
Ending Capital balance $4,700
5. Speedy Computer Service
Balance Sheet
March 31, 2015
Assets Liabilities and Owner’s Equity
Cash................................. $4,100 Accounts payable .......... $ 100
Accts Receivable............ 600 B. Smith, Capital............. 3, 700
Supplies........................... 100
Total Assets..................... $4,800
Total liabilities and
owner’s equity............. $4,800
6. First, note that the cash investment ($2,000) and cash withdrawal
($2,000) affect the cash balance but do not affect the amount of net
income earned during the period. Also, revenues in the amount of $600
(March 21) are reflected in the net income figure, but have not yet been
collected. As such, these revenues did not impact the cash balance.
