Jethro Company, a retailer, had the following account balances as of April 30, 2012:

.:.
During May, the company completed the following transactions.
May 3 Paid one-half of 4/30/12 accounts payable.
4 Purchased inventory on account, $5,000.
6 Collected all of 4/30/12 accounts receivable.
7 Sold inventory costing $3,850 for $3,000 cash and $2,000 on account.
8 Sold one-half of the land for $6,500, receiving $4,000 cash plus a note for $2,500.
15 Paid installment of $2,500 on notes payable (entire amount reduces the liability account).
21 Issued additional capital stock for $1,000 cash.
23 Sold inventory costing $2,000 for $3,750 cash.
25 Paid salaries of $1,000.
26 Paid rent of $250.
29 Purchased desk for $250 cash.
Required:
1. Prepare the journal entry for each transaction.
2. Set up T-accounts with the proper account balances at April 30, 2012, and post the entries to
the T-accounts.
3. Prepare a trial balance as of May 31, 2012.
SOLUTION:

1.

2012
May

3 Accounts Payable.................................................

3,000

Cash................................................................
4 Inventory..............................................................

3,000
5,000

Accounts Payable...........................................
P 346 (LO3, LO4)

May

5,000

(Continued)

6 Cash......................................................................

2,450

Accounts Receivable......................................

2,450

7 Cash......................................................................

3,000

Accounts Receivable............................................

2,000

Sales Revenue................................................
Cost of Goods Sold..............................................

5,000
3,850

Inventory........................................................

3,850

8 Cash......................................................................

4,000

Notes Receivable.................................................

2,500

Land...............................................................
15 Notes Payable.......................................................

6,500
2,500

Cash................................................................
21 Cash......................................................................

2,500
1,000

Capital Stock..................................................
23 Cash......................................................................
Sales Revenue................................................

1,000
3,750
3,750

Cost of Goods Sold..............................................

2,000

Inventory........................................................
25 Salaries Expense..................................................

2,000
1,000

Cash................................................................
26 Rent Expense.......................................................

1,000
250

Cash................................................................
29 Furniture...............................................................

250
250

Cash................................................................

250

2.
Beg. bal.
5/6
5/7
5/8
5/21
5/23
End. bal.

CASH
5,050 5/3
2,450 5/15
3,000 5/25
4,000 5/26
1,000 5/29
3,750
12,250

3,000
2,500
1,000
250
250

ACCOUNTS RECEIVABLE
Beg. bal.
2,450 5/6
2,450
5/7
2,000
End. bal.
2,000

Beg. bal.
End. bal.

LAND
13,000 5/8
6,500

Beg. bal.
5/29
End. bal.

FURNITURE
2,000
250
2,250

6,500

5/8

NOTES RECEIVABLE
2,500

Beg. bal.
5/4
End. bal.

INVENTORY
8,000 5/7
5,000 5/23
7,150

Beg. bal.

BUILDING
12,000

5/15

NOTES PAYABLE
2,500 Beg. bal.
End. bal.

3,850
2,000

12,500
10,000

5/3

ACCOUNTS PAYABLE
3,000 Beg. bal.
5/4
End. bal.

6,000
5,000
8,000

RETAINED EARNINGS
Beg. bal.

9,000

COST OF GOODS SOLD

5/7
3,850
5/23
2,000
End. bal.
5,850

3.

CAPITAL STOCK
Beg. bal.
5/21
End. bal.

15,000
1,000
16,000

SALES REVENUE
5/7
5/23
End. bal.

5,000
3,750
8,750

5/25

SALARIES EXPENSE
1,000

5/26

RENT EXPENSE
250

Jethro Company
Trial Balance
May 31, 2012

Debits
Cash...........................................................................................

$12,250

Notes Receivable......................................................................

2,500

Accounts Receivable.................................................................

2,000

Inventory...................................................................................

7,150

Land..........................................................................................

6,500

Building.....................................................................................

12,000

Furniture....................................................................................

2,250

Credits

Notes Payable............................................................................

$10,000

Accounts Payable......................................................................

8,000

Capital Stock.............................................................................

16,000

Retained Earnings.....................................................................

9,000

Sales Revenue...........................................................................

8,750

Cost of Goods Sold...................................................................

5,850

Salaries Expense.......................................................................

1,000

Rent Expense............................................................................

250

Totals...................................................................................

$51,750

$51,750