Aracel Engineering completed the following transactions in the month of June. To launch the company. Jenna Aracel, the owner, inserted $100,000 cash, office equipment with a value of $5,000, and $60,000 of drafting equipment in exchange for common stock. The company purchased land worth $49.000 for an office by paying $6, 300 cash and signing a long-term note payable for $42, 700. The company purchased a portable building with $55,000 cash and moved it onto the land acquired in b. The company paid $3,000 cash for the premium on an 18-month insurance policy. The company completed and delivered a set of plans for a client and collected $6, 200 cash. The company purchased $20,000 of additional drafting equipment by paying $9, 500 cash and signing a long-term note pay able for $10, 500. The company completed $14,000 of engineering services for a client. This amount is to be received in 30 days. The company purchased $1, 150 of additional office equipment on credit. The company completed engineering services for $22,000 on credit. The company received a bill for rent of equipment that was used on a recently completed job. The $1, 333 rent cost must be paid within 30 days, k. The company collected $7,000 cash in partial payment from the client described in transaction g. The company paid $1, 200 cash for wages to a drafting assistant. The company paid $1, 150 cash to settle the account payable created in transaction h. The company paid $925 cash for minor maintenance of its drafting equipment, The company paid $9, 480 cash in dividends, The company paid $1, 200 cash for wages to a drafting assistant. The company paid $2, 500 cash for advertisements on the Web during June. Required Prepare general journal entries to record these transactions (use the account titles listed in pan 2). Open the following ledger accounts-their account numbers are in parentheses (use the balance column format): Cash (101): Accounts Receivable (106): Prepaid Insurance (108); Office Equipment (163); Drafting Equipment (164); Building (170); Land (172); Accounts Payable (201): Notes Payable (250); Common Stock (307); Dividends (319); Engineering Fees Earned (402); Wages Expense (601); Equipment Rental Expense (602); Advertising Expense (603); and Repairs Expense (604). Post the journal entries from part I to the accounts and enter the balance after each posting. Prepare a trial balance as of the end of June.
The Correct Answer and Explanation is :
Here are the general journal entries, ledger postings, trial balance, and explanation for Aracel Engineering’s June transactions.
Journal Entries:
| Date | Account Titles & Explanation | Debit ($) | Credit ($) |
|---|---|---|---|
| June 1 | Cash | 100,000 | |
| Office Equipment | 5,000 | ||
| Drafting Equipment | 60,000 | ||
| Common Stock | 165,000 | ||
| (Owner investment in the business) | |||
| June 2 | Land | 49,000 | |
| Cash | 6,300 | ||
| Notes Payable | 42,700 | ||
| (Purchase of land with partial cash and note) | |||
| June 3 | Building | 55,000 | |
| Cash | 55,000 | ||
| (Purchase of building) | |||
| June 4 | Prepaid Insurance | 3,000 | |
| Cash | 3,000 | ||
| (Prepaid insurance for 18 months) | |||
| June 5 | Cash | 6,200 | |
| Engineering Fees Earned | 6,200 | ||
| (Received cash for engineering services) | |||
| June 6 | Drafting Equipment | 20,000 | |
| Cash | 9,500 | ||
| Notes Payable | 10,500 | ||
| (Purchased drafting equipment on partial cash and note) | |||
| June 7 | Accounts Receivable | 14,000 | |
| Engineering Fees Earned | 14,000 | ||
| (Completed engineering services on account) | |||
| June 8 | Office Equipment | 1,150 | |
| Accounts Payable | 1,150 | ||
| (Purchased office equipment on credit) | |||
| June 9 | Accounts Receivable | 22,000 | |
| Engineering Fees Earned | 22,000 | ||
| (Completed services on credit) | |||
| June 10 | Equipment Rental Expense | 1,333 | |
| Accounts Payable | 1,333 | ||
| (Received bill for equipment rental) | |||
| June 11 | Cash | 7,000 | |
| Accounts Receivable | 7,000 | ||
| (Collected partial payment from client) | |||
| June 12 | Wages Expense | 1,200 | |
| Cash | 1,200 | ||
| (Paid wages) | |||
| June 13 | Accounts Payable | 1,150 | |
| Cash | 1,150 | ||
| (Paid office equipment purchased on credit) | |||
| June 14 | Repairs Expense | 925 | |
| Cash | 925 | ||
| (Paid for drafting equipment maintenance) | |||
| June 15 | Dividends | 9,480 | |
| Cash | 9,480 | ||
| (Paid dividends) | |||
| June 16 | Wages Expense | 1,200 | |
| Cash | 1,200 | ||
| (Paid wages) | |||
| June 17 | Advertising Expense | 2,500 | |
| Cash | 2,500 | ||
| (Paid for online advertisement) |
Ledger Posting and Trial Balance
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Explanation of Transactions and Financial Impact
In June, Aracel Engineering recorded various transactions related to its startup, asset purchases, revenue generation, and expenses. Here’s a breakdown of the key transactions and their effects on the financial records:
- Owner Investment
Jenna Aracel invested $100,000 in cash, $5,000 in office equipment, and $60,000 in drafting equipment, increasing assets and common stock. - Asset Purchases
- Land was acquired for $49,000, with a partial cash payment and a long-term note payable.
- A portable building was purchased for $55,000 in cash, adding to fixed assets.
- Prepaid insurance of $3,000 was recorded for an 18-month policy.
- Revenue Recognition
- Engineering services were provided, generating revenue of $6,200 in cash and $36,000 on credit (accounts receivable).
- Additional Equipment
- Drafting equipment worth $20,000 was purchased, partially paid in cash ($9,500) and the remainder financed via a note payable ($10,500).
- Office equipment worth $1,150 was bought on credit.
- Liabilities and Expenses
- The company received a $1,333 bill for equipment rental, increasing accounts payable.
- Expenses included wages, minor repairs ($925), and advertising ($2,500), which reduced cash.
- A cash dividend of $9,480 was paid, reducing retained earnings.
- Collections and Payments
- $7,000 was collected from a client.
- Accounts payable of $1,150 was settled.
Final Financial Position
The trial balance ensures debits equal credits, confirming accurate bookkeeping. Assets increased significantly, and revenue generation began, positioning the company for future growth.
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