analyzing the effects of transactions using t accounts and preparing 459794

Jessica Pothier opened FunFlatables on June 1, 2010. The company rents out moon walks and

infl atable slides for parties and corporate events. The company also has obtained the use of an

abandoned ice rink located in a local shopping mall, where its rental products are displayed and

available for casual hourly rental by mall patrons. The following transactions occurred during the

fi rst month of operations.

a. Jessica contributed $50,000 cash to the company in exchange for its stock.

b. Purchased inflatable rides and inflation equipment, paying $20,000 cash.

c. Received $5,000 cash from casual hourly rentals at the mall.

d. Rented rides and equipment to customers for $10,000. Received cash of $2,000 and the rest

is due from customers.

e. Received $2,500 from a large corporate customer as a deposit on a party booking for July 4.

f. Began to prepare for the July 4 party by purchasing various party supplies on account for $600.

g. Paid $6,000 in cash for renting the mall space this month.

h. Prepaid next month’s mall space rental charge of $6,000.

i. Received $1,000 from customers on accounts receivable.

j. Paid $4,000 in wages to employees for work done during the month.

k. Paid $1,000 for running a television ad this month.

Required:

1. Set up appropriate T-accounts. All accounts begin with zero balances.

2. Record in the T-accounts the effects of each transaction for FunFlatables in June, referencing

each transaction in the accounts with the transaction letter. Show the unadjusted ending

balances in the T-accounts.

3. Prepare an unadjusted trial balance for the end of June 2010.

4. Refer to the revenues and expenses shown on the unadjusted trial balance and write a short

memo to Jessica offering your opinion on the results of operations during the first month of

business.