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Mostert Music Company had the following transactions in March:a. Sold music lessons to customers for $14,700; received $9,300 incash and the rest on account. b. Paid $1,080 in wages for themonth. c. Received a $500 bill for utilities that will be paid inApril. d. Received $2,100 from customers as deposits on musiclessons to be given in April. 1. Based on the information above,prepare a cash basis and an accrual basis income statement.

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Hubert Koch
Hubert KochLv2
28 Sep 2019

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The transactions completed by PS Music during June 2018 weredescribed at the end of Chapter 1. The following transactions werecompleted during July, the second month of the business’soperations: Jul. 1 Peyton Smith made an additional investment in PSMusic in exchange for common stock by depositing $5,000 in PSMusic’s checking account. 1 Instead of continuing to share officespace with a local real estate agency, Peyton decided to rentoffice space near a local music store. Paid rent for July, $1,750.1 Paid a premium of $2,700 for a comprehensive insurance policycovering liability, theft, and fire. The policy covers a one-yearperiod. 2 Received $1,000 on account. 3 On behalf of PS Music,Peyton signed a contract with a local radio station, KXMD, toprovide guest spots for the next three months. The contractrequires PS Music to provide a guest disc jockey for 80 hours permonth for a monthly fee of $3,600. Any additional hours beyond 80will be billed to KXMD at $40 per hour. In accordance with thecontract, Peyton received $7,200 from KXMD as an advance paymentfor the first two months. 3 Paid $250 on account. 4 Paid anattorney $900 for reviewing the July 3 contract with KXMD. (Recordas Miscellaneous Expense.) 5 Purchased office equipment on accountfrom Office Mart, $7,500. 8 Paid for a newspaper advertisement,$200. 11 Received $1,000 for serving as a disc jockey for a party.13 Paid $700 to a local audio electronics store for rental ofdigital recording equipment. 14 Paid wages of $1,200 toreceptionist and part-time assistant. Enter the followingtransactions on Page 2 of the two-column journal: Jul. 16 Received$2,000 for serving as a disc jockey for a wedding reception. 18Purchased supplies on account, $850. 21 Paid $620 to Upload Musicfor use of its current music demos in making various music sets. 22Paid $800 to a local radio station to advertise the services of PSMusic twice daily for the remainder of July. 23 Served as discjockey for a party for $2,500. Received $750, with the remainderdue August 4, 2018. 27 Paid electric bill, $915. 28 Paid wages of$1,200 to receptionist and part-time assistant. 29 Paidmiscellaneous expenses, $540. 30 Served as a disc jockey for acharity ball for $1,500. Received $500, with the remainder due onAugust 9, 2018. 31 Received $3,000 for serving as a disc jockey fora party. 31 Paid $1,400 royalties (music expense) to National MusicClearing for use of various artists’ music during July. 31 Paiddividends, $1,250. PS Music’s chart of accounts and the balance ofaccounts as of July 1, 2018 (all normal balances), are as follows:11 Cash $3,920 12 Accounts Receivable 1,000 14 Supplies 170 15Prepaid Insurance — 17 Office Equipment — 21 Accounts Payable 25023 Unearned Revenue — 31 Common Stock 4,000 33 Dividends 500 41Fees Earned 6,200 50 Wages Expense 400 51 Office Rent Expense 80052 Equipment Rent Expense 675 53 Utilities Expense 300 54 MusicExpense 1,590 55 Advertising Expense 500 56 Supplies Expense 180 59Miscellaneous Expense 415 Required: 1. Enter the July 1, 2018,account balances in the appropriate balance column of a four-columnaccount. No entry is needed for accounts with a zero balance. WriteBalance in the Item column, and select a check mark in the PostingReference column. (Note: Verify the equality of the debit andcredit balances in the ledger before proceeding with the nextinstruction.) 2. Analyze and journalize each transaction in atwo-column journal beginning on Page 1, omitting journal entryexplanations. Refer to the Chart of Accounts for exact wording ofaccount titles. 3. Post the journal to the ledger, extending theaccount balance to the appropriate balance column after eachposting. Indicate a zero balance by inserting a 0 (zero) in eitherof the Balance columns opposite the entry. 4. Prepare an unadjustedtrial balance as of July 31, 2018. none of the previous answershave the entire answers

PA3-3 Analyzing the Effects of Transactions using T-accounts, preparing an unadjusted trial balance, and determining net income and net profit margin

Spicewood Stables, Inc., was established in Dripping Springs, Texas, on April 1. The company provides stables, care for animals, and grounds for riding and showing horses. You have been hired as the new Assistant Controller. The following transactions for April are provided for your review.

1. Received contributions from investors and issued $200,000 of common stock on April 1.

2. Built a barn and other buildings for $142,000. On April 2, the company paid half the amount in cash and signed a three-year note payable for the balance.

3. Provided $16,000 in animal care services for customers on April 3, all on credit.

4. Rented stables to customers who cared for their own animals; received cash of $13,000 on April 4 for rent earned this month.

5. On April 5, received $1,500 cash from a customer to board her house in May, June, and July (record as Unearned Revenue).

6. Purchased hay and feed supplies on account on April 6 for $3,000.

7. Paid $1,700 on accounts payable on April 7 for previous purchases.

8. Received $1,000 from customers on April 8 on accounts receivable.

9. On April 9, prepaid a two-year insurance policy for $3,600 for coverage starting in May.

10. On April 28, paid $800 in cash for water and utilities used this month.

11. Paid $14,000 in wages on April 29 for work done this month.

12. Received an electric utility bill on April 30 for $1,200 for usage in April; the bill will be paid next month.

Required:

1. Record the effects of transactions (1) through (12) using journal entries.

2. If you are completing this requirement manually, set up appropriate t-accounts. All accounts begin with zero balances. Summarize the journal entries from requirement 1 in the t-accounts, referencing each transaction in the accounts with the transaction number. Show the unadjusted ending balances in the t-accounts.

3. Prepare an unadjusted trial balance as of April 30.

4. Refer to the revenues and expenses shown on the unadjusted trial balance. Based on this information, calculate preliminary net income and determine whether the net profit margin is better or worse than the 30.0 percent earned by a close competitor.

Levine Company uses the perpetual inventory system and allows customers to use two credit cards in charging purchases. With the Suntrust Bank Card, Levine receives an immediate credit to its account when it deposits sales receipts. Suntrust assesses a 4% service charge for credit card sales. The second credit card that Levine accepts is the Continental Card. Levine sends its accumulated receipts to Continental on a weekly basis and is paid by Continental about a week later. Continental assesses a 2.5% charge on sales for using its card.

April 8. Sold merchandise for $8,400 (that had cost $6,000) and accepted the customer's Suntrust Bank Card. The Suntrust receipts are immediately deposited in Levine's bank account.

12. Sold merchandise for $5,600 (that had cost $3,500) and accepted the customer's Continental Card. Transferred $5,600 of credit card receipts to Continental, requesting payment.

20. Received Continental's check for the April 12 billing, less the service charge.

Prepare journal entries to record the above-selected credit card transactions of Levine Company.

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