Kiersted Financial Services was formed on November 1, 2014. During the month of November, the following events and tra
Kiersted Financial Services was formed on November 1, 2014. During the month of November, the following events and transactions occurred:
Nov. 1 Haakon Kiersted, the owner, invested $35,000 cash in the company. He also invested equipment that had originally cost Haakon $25,000 but was currently worth $12,000.
2 Hired one employee to work in the office for a monthly salary of $2,825.
3 Signed a three-year contract to lease office space for $2,140 per month. Paid the first and last month's rent in cash. (The payment for the final month's rent should be considered an asset and be recorded in Prepaid Rent.)
4 Purchased a one-year insurance policy for $4,740 to be paid in monthly instalments on the fourth day of each month. Paid the first month's premium.
5 Purchased additional equipment for $18,000. Paid $6,000 cash and signed a note payable for the balance.
6 Purchased supplies for $1,550 on account.
7 Purchased additional supplies for $475 cash.
16 Completed services for a customer and immediately collected $990.
20 Completed services for two customers and billed them a total of $4,500.
26 Paid $1,000 for the supplies purchased on account on November 6.
27 The telephone bill for November was $220. It will be paid in December.
27 Received a $750 cash advance from a customer for services to be provided in December.
29 Collected $2,800 from one of the customers billed on November 20.
30 Paid $60 interest on the note payable.
30 Paid the employee's monthly salary, $2,825.
30 Paid Haakon Kiersted $700 for his personal use.
30 Paid Sony Ltd. for a new sound system for Haakon's home, $1,150 cash.
(a) Prepare journal entries to record the transactions.
(b) Post the journal entries to T accounts.
(c) Prepare a trial balance as at November 30, 2014.
TAKING IT FURTHER Haakon asks if the change in his cash account balance from the beginning to the end of the month is equal to his profit or loss for the month. Explain to Haakon whether or not this is true and why.