Binbutti Engineering, a sole proprietorship, completed the following transactions during July 2014, the third month of operations

Binbutti Engineering, a sole proprietorship, completed the following transactions during July 2014, the third month of operations:

July 1 Bishr Binbutti, the owner, invested $300,000 cash, office equipment with a value of $12,000, and $90,000 of drafting equipment in the business.

2 Purchased land for an office. The land was worth $108,000, which was paid with $10,800 cash and a long-term note payable for $97,200.

3 Purchased a portable building with $150,000 cash and moved it onto the land. 5 Paid $12,000 cash for the premiums on two one-year insurance policies.

7 Completed and delivered a set of plans for a client and collected $1,400 cash.

9 Purchased additional drafting equipment for $45,000. Paid $21,000 cash and signed a long-term note payable for the $24,000 balance. 10 Completed $4,000 of engineering services for a client. This amount is to be paid within 30 days. 12 Purchased $4,500 of additional office equipment on credit.

15 Completed engineering services for $7,000 on credit.

16 Received a bill for rent on equipment that was used on a completed job. The $1 3,800 rent must be paid within 30 days.

17 Collected $400 from the client of July 10.

19 Paid $12,000 wages to the drafting assistants.

22 Paid the account payable created on July 12.

25 Paid $1,350 cash for some repairs to an item of drafting equipment.

26 Binbutti withdrew $800 cash from the business for personal use.

30 Paid $12,000 wages to the drafting assistants.

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31 Paid $6,000 cash for advertising in the local newspaper during July.

Required

1. Prepare General Journal entries to record the transactions. Use page 1 for the journal.

2. Set up the following accounts (use the balance column format or T-accounts), entering the balances brought forward from June 30, 2014: Cash (101) $26,000; Accounts Receivable (106) $3,000; Prepaid Insurance (128) $500; Office Equipment (163) $1,700; Drafting Equipment (167) $1,200; Building (173) $42,000; Land (183) $28,000; Accounts Payable (201) $1,740; Long-Term Notes Payable (251) $24,000; Bishr Binbutti, Capital (301) $54,000; Bishr Binbutti, Withdrawals (302) $1,000; Engineering Fees Earned (401) $29,600; Wages Expense (623) $4,000; Equipment Rental Expense (645) $1,000; Advertising Expense (655) $640; and Repairs Expense (684) $300.

3. Post the entries to the accounts and enter the balance after each posting.

4. Prepare a trial balance at July 31, 2014.

SOLUTION

Part 1
		General Journal			Page 1
Date		Account Titles and Explanations	PR	Debit	Credit
2014
July	1	Cash..............................................................	101	300,000
		Office Equipment.........................................	163	12,000
		Drafting Equipment......................................	167	90,000
		Bishr Binbutti, Capital.............................	301		402,000
		Investment by owner.
	2	Land..............................................................	183	108,000
		Cash..........................................................	101		10,800
		Long-Term Notes Payable.......................	251		97,200
		Purchased land.
	3	Building........................................................	173	150,000
		Cash..........................................................	101		150,000
		Purchased a building.
	5	Prepaid Insurance........................................	128	12,000
		Cash..........................................................	101		12,000
		Purchased two one-year insurance policies.
	7	Cash..............................................................	101	1,400
		Engineering Fees Earned........................	401		1,400
		Completed services for cash.
	9	Drafting Equipment......................................	167	45,000
		Cash..........................................................	101		21,000
		Long-Term Notes Payable.......................	251		24,000
		Purchased drafting equipment.
	10	Accounts Receivable...................................	106	4,000
		Engineering Fees Earned........................	401		4,000
		Completed services on credit.

12	Office Equipment.........................................	163	4,500
	Accounts Payable....................................	201	4,500
	Purchased office equipment on credit.
15	Accounts Receivable...................................	106	7,000
	Engineering Fees Earned........................	401	7,000
	Completed services on credit.
16	Equipment Rental Expense.........................	645	13,800
	Accounts Payable....................................	201	13,800
	Equipment rental to be paid in 30 days.
17	Cash..............................................................	101	400
	Accounts Receivable...............................	106	400
	Collection from credit customer.
19	Wages Expense............................................	623	12,000
	Cash..........................................................	101	12,000
	Paid drafting assistants.
22	Accounts Payable........................................	201	4,500
	Cash..........................................................	101	4,500
	Paid July 12 transaction.
25	Repairs Expense..........................................	684	1,350
	Cash..........................................................	101	1,350
	Paid for repairs on drafting equipment.
26	Bishr Binbutti, Withdrawals.........................	302	800
	Cash..........................................................	101	800
	Owner withdrawal.
30	Wages Expense............................................	623	12,000
	Cash..........................................................	101	12,000
	Paid drafting assistants.
31	Advertising Expense....................................	655	6,000
	Cash..........................................................	101	6,000
	Paid for advertising in local newspaper.

Assume all entries were journalized on Page 1 of the General Journal.

Parts 2 and 3	Parts 2 and 3
		Cash			Account No. 101	Account No. 101
Date		Explanation	PR	Debit	Credit	Balance
2014
June	30	Beginning balance				26,000
July	1		G1	300,000		326,000
	2		G1		10,800	315,200
	3		G1		150,000	165,200
	5		G1		12,000	153,200
	7		G1	1,400		154,600
	9		G1		21,000	133,600
	17		G1	400		134,000
	19		G1		12,000	122,000
	22		G1		4,500	117,500
	25		G1		1,350	116,150
	26		G1		800	115,350
	30		G1		12,000	103,350
	31		G1		6,000	97,350
		Accounts Receivable			Account No. 106	Account No. 106
Date		Explanation	PR	Debit	Credit	Balance
2014
June	30	Beginning balance				3,000
July	10		G1	4,000		7,000
	15		G1	7,000		14,000
	17		G1		400	13,600
		Prepaid Insurance			Account No. 128	Account No. 128
Date		Explanation	PR	Debit	Credit	Balance
2014
June	30	Beginning balance				500
July	5		G1	12,000		12,500
		Office Equipment			Account No. 163	Account No. 163
Date		Explanation	PR	Debit	Credit	Balance
2014
June	30	Beginning balance				1,700
July	1		G1	12,000		13,700
	12		G1	4,500		18,200

		Drafting Equipment			Account No. 167	Account No. 167
Date		Explanation	PR	Debit	Credit	Balance
2014
June	30	Beginning balance				1,200
July	1		G1	90,000		91,200
	9		G1	45,000		136,200
		Building			Account No. 173	Account No. 173
Date		Explanation	PR	Debit	Credit	Balance
2014
June	30	Beginning balance				42,000
July	3		G1	150,000		192,000
		Land			Account No. 183	Account No. 183
Date		Explanation	PR	Debit	Credit	Balance
2014
June	30	Beginning balance				28,000
July	2		G1	108,000		136,000
		Accounts Payable			Account No. 201	Account No. 201
Date		Explanation	PR	Debit	Credit	Balance
2014
June	30	Beginning balance				1,740
July	12		G1		4,500	6,240
	16		G1		13,800	20,040
	22		G1	4,500		15,540
		Long-Term Notes Payable			Account No. 251	Account No. 251
Date		Explanation	PR	Debit	Credit	Balance
2014
June	30	Beginning balance				24,000
July	2		G1		97,200	121,200
	9		G1		24,000	145,200
		Bishr Binbutti, Capital			Account No. 301	Account No. 301
Date		Explanation	PR	Debit	Credit	Balance
2014
June	30	Beginning balance				54,000
July	1		G1		402,000	456,000

		Bishr Binbutti, Withdrawals	Bishr Binbutti, Withdrawals			Account No. 302	Account No. 302
Date		Explanation	Explanation	PR	Debit	Credit	Balance
2014
June	30	Beginning balance					1,000
July	26			G1	800		1,800
		Engineering Fees Earned	Engineering Fees Earned			Account No. 401	Account No. 401
Date		Explanation	Explanation	PR	Debit	Credit	Balance
2014
June	30	Beginning balance					29,600
July	7			G1		1,400	31,000
	10			G1		4,000	35,000
	15			G1		7,000	42,000
		Wages Expense	Wages Expense			Account No. 623	Account No. 623
Date		Explanation	Explanation	PR	Debit	Credit	Balance
2014
June	30	Beginning balance					4,000
July	19			G1	12,000		16,000
	30			G1	12,000		28,000
		Equipment Rental Expense	Equipment Rental Expense			Account No. 645	Account No. 645
Date		Explanation	Explanation	PR	Debit	Credit	Balance
2014
June	30	Beginning balance					1,000
July	16			G1	13,800		14,800
		Advertising Expense	Advertising Expense			Account No. 655	Account No. 655
Date		Explanation	Explanation	PR	Debit	Credit	Balance
2014
June	30	Beginning balance					640
July	31			G1	6,000		6,640
		Repairs Expense	Repairs Expense			Account No. 684	Account No. 684
Date		Explanation	Explanation	PR	Debit	Credit	Balance
2014
June	30	Beginning balance					300
July	25			G1	1,350		1,650

Part 4
	BINBUTTI ENGINEERING
	Trial Balance
Acct.	July 31, 2014
Acct.
No.	Account Title		Debit	Debit	Credit	Credit	Credit
101	Cash....................................................................	$	97,350	97,350
106	Accounts receivable..........................................		13,600	13,600
128	Prepaid insurance..............................................		12,500	12,500
163	Office equipment................................................		18,200	18,200
167	Drafting equipment............................................		136,200
173	Building..............................................................		192,000
183	Land....................................................................		136,000
201	Accounts payable..............................................				$	15,540	15,540
251	Long-term notes payable..................................					145,200	145,200
301	Bishr Binbutti, capital........................................					456,000	456,000
302	Bishr Binbutti, withdrawals...............................		1,800	1,800
401	Engineering fees earned...................................					42,000	42,000
623	Wages expense..................................................		28,000	28,000
645	Equipment rental expense................................		14,800	14,800
655	Advertising expense..........................................		6,640	6,640
684	Repairs expense................................................		1,650	1,650
	Totals..................................................................	$658,740	$658,740		$658,740	$658,740