Applying the accounting cycle
On July 1, 2013, Lula Plume created a new self-storage business, Safe Storage Co. The following transactions occurred during the company’s first month.
July 1 Plume invested $30,000 cash and buildings worth $150,000 in the company.
2 The company rented equipment by paying $2,000 cash for the first month’s (July) rent.
5 The company purchased $2,400 of office supplies for cash.
10 The company paid $7,200 cash for the premium on a 12-month insurance policy. Coverage begins on July 11.
14 The company paid an employee $1,000 cash for two weeks’ salary earned.
24 The company collected $9,800 cash for storage fees from customers.
28 The company paid $1,000 cash for two weeks’ salary earned by an employee.
29 The company paid $950 cash for minor repairs to a leaking roof.
30 The company paid $400 cash for this month’s telephone bill.
31 Plume withdrew $2,000 cash from the company for personal use.
The company’s chart of accounts follows:
figure
101 Cash
106 Accounts Receivable
124 Office Supplies
128 Prepaid Insurance
173 Buildings
174 Accumulated Depreciation-Buildings
209 Salaries Payable
301 L. Plume, Capital
302 L. Plume, Withdrawals
401 Storage Fees Earned
606 Depreciation Expense-Buildings
622 Salaries Expense
637 Insurance Expense
640 Rent Expense
650 Office Supplies Expense
684 Repairs Expense
688 Telephone Expense
901 Income Summary
Required

1.Use the balance column format to set up each ledger account listed in its chart of accounts.
2.Prepare journal entries to record the transactions for July and post them to the ledger accounts. Record prepaid and unearned items in balance sheet accounts.
3.Prepare an unadjusted trial balance as of July 31.
4.Use the following information to journalize and post adjusting entries for the month:
a.Two-thirds of one month’s insurance coverage has expired.
b.At the end of the month, $1,525 of office supplies are still available.
c.This month’s depreciation on the buildings is $1,500.
d.An employee earned $100 of unpaid and unrecorded salary as of month-end.
e.The company earned $1,150 of storage fees that are not yet billed at month-end.
5.Prepare the adjusted trial balance as of July 31. Prepare the income statement and the statement of owner’s equity for the month of July and the balance sheet at July 31, 2013.
6.Prepare journal entries to close the temporary accounts and post these entries to the ledger.
7.Prepare a post-closing trial balance.

Check(3) Unadj. trial balance totals, $189,800

(4a) Dr. Insurance Expense, $400

(5) Net income, $2,725; L. Plume, Capital (7/31/2013), $180,725; Total assets, $180,825

(7) P-C trial balance totals, $182,325