Answer:
a)
1. Issued 1,000 shares of common stock at $95 per share.
Dr Cash 95,000
Cr Common stock 95,000
2. Paid $2,600 for each of 12 months to rent office and warehouse space for 2017. The rent was paid on the last day of each month.
Dr Rent expense 31,200
Cr Cash 31,200
3. Made total sales for services of $190,000: $65,000 for cash and $125,000 on account.
Dr Cash 65,000
Dr Accounts receivable 125,000
Cr Service revenue 190,000
4. Purchased land for $32,000.
Dr Land 32,000
Cr Cash 32,000
5. Borrowed $75,000 on December 31. The note payable matures in two years.
Dr Cash 75,000
Cr Notes payable 75,000
6. Salaries and wages totaling $80,000 were paid during the year.
Dr Wages expense 80,000
Cr Cash 80,000
7. Miscellaneous expenses totaling $40,000 were paid during the year.
Dr Miscellaneous expense 40,000
Cr Cash 40,000
8. $56,000 was received from customers as payment on account.
Dr Cash 56,000
Cr Accounts receivable 56,000
9. Declared and paid a dividend of $26,000.
Dr Dividends 26,000
Cr Cash 26,000
b)
Cash
debit credit
95,000
31,200
65,000
32,000
75,000
80,000
40,000
56,000
26,000
81,800
Common stock
debit credit
95,000
Rent expense
debit credit
31,200
31,200
Accounts receivable
debit credit
125,000
56,000
69,000
Service revenue
debit credit
190,000
190,000
Land
debit credit
32,000
Notes payable
debit credit
75,000
Wages expense
debit credit
80,000
80,000
Miscellaneous expense
debit credit
40,000
40,000
Dividends
debit credit
26,000
26,000
Retained earnings
debit credit
38,800
26,000
12,800
closing entries
Dr Service revenue 190,000
Cr Income summary 190,000
Dr Income summary 151,200
Cr Rent expense 31,200
Cr Wages expense 80,000
Cr Miscellaneous expense 40,000
Dr Income summary 38,800
Cr Retained earnings 38,800
Dr Retained earnings 26,000
Cr Dividends 26,000
c. Hope, inc.
Income Statement
For the year ended December 31, 2017
Revenues $190,000
Operating expenses:
- Rent expense $31,200
- Wages expense $80,000
- Miscellaneous expense $40,000 ($151,200)
Net income $38,800