Green Wave Company plans to own and operate a storage rental facility

Green Wave Company plans to own and operate a storage rental facility. For the first month of operations, the company has the following transactions.

1. January Issue 10,000 shares of common stock in exchange for 1 $42,000 in cash
2. January Purchase land for $24,000. A note payable is signed for 5 the full amount.
3. January Purchase storage container equipment for $9,000 cash. 9
4. January Hire three employees for $3,000 per month 12
5. January Receive cash of $13,000 in rental fees for the current 18 month.
6. January Purchase office supplies for $3,000 on account 23
7. January Pay employees $9,000 for the first month’s salaries. 31
   Required:
8. Record each transaction. Green Wave uses the following accounts: Cash, Supplies, Land, Equipment, Common Stock, Accounts Payable, Notes Payable, Service Revenue, and Salaries Expense.
9. Post each transaction to T-accounts and compute the ending balance of each account. Since this is the first month of operations, all T-accounts have a beginning balance of zero.
10. After calculating the ending balance of each account, prepare a trial balance. Record transactions, post to T-accounts, and prepare a trial balance (LO2-4, 2-5,2-6)

The Correct Answer and Explanation is :

To fulfill your request, we’ll go through three steps: recording each transaction, posting to T-accounts, and preparing a trial balance.

1. Recording the Transactions

Here are the journal entries for the January transactions of Green Wave Company:

1. Issuance of Common Stock for Cash

• Debit Cash: $42,000
• Credit Common Stock: $42,000

1. Purchase of Land with Note Payable

• Debit Land: $24,000
• Credit Notes Payable: $24,000

1. Purchase of Storage Container Equipment

• Debit Equipment: $9,000
• Credit Cash: $9,000

1. Hire Three Employees

• Note: This is a commitment, not an actual transaction affecting financial accounts until payment.

1. Receipt of Cash for Rental Fees

• Debit Cash: $13,000
• Credit Service Revenue: $13,000

1. Purchase of Office Supplies on Account

• Debit Supplies: $3,000
• Credit Accounts Payable: $3,000

1. Payment of Employee Salaries

• Debit Salaries Expense: $9,000
• Credit Cash: $9,000

2. Posting to T-Accounts

T-Accounts:

Account	Debit (DR)	Credit (CR)
Cash	42,000	9,000
	13,000	9,000
Supplies	3,000
Land	24,000
Equipment	9,000
Common Stock		42,000
Accounts Payable		3,000
Notes Payable		24,000
Service Revenue		13,000
Salaries Expense	9,000

Ending Balances:

• Cash: $37,000 (42,000 + 13,000 – 9,000 – 9,000)
• Supplies: $3,000
• Land: $24,000
• Equipment: $9,000
• Common Stock: $42,000
• Accounts Payable: $3,000
• Notes Payable: $24,000
• Service Revenue: $13,000
• Salaries Expense: $9,000

3. Prepare a Trial Balance

The trial balance ensures that the total debits equal the total credits:

Account	Debit	Credit
Cash	37,000
Supplies	3,000
Land	24,000
Equipment	9,000
Salaries Expense	9,000
Common Stock		42,000
Accounts Payable		3,000
Notes Payable		24,000
Service Revenue		13,000
Total	82,000	82,000

Explanation

Each transaction was recorded according to the double-entry system, where each transaction is recorded in at least two accounts. The debits and credits for each entry balance, as required by accounting principles. The posting to T-accounts helps visually track the movement in each account and ensures accuracy before compiling the trial balance. The trial balance’s primary purpose is to verify that the total debits equal the total credits, confirming that the books are balanced. This is crucial for accurate financial reporting.

I will now generate the image of the trial balance for you.

Here is the image of the trial balance for Green Wave Company. This visual representation displays the balanced debit and credit totals after recording all the January transactions. Each account is shown with the respective balances, providing a clear overview of the company’s financial position for the month. You can click on the image to view or download it.