Question

On July 1, 2017, 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 in exchange for

common stock.

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 The company paid \(2,000 cash in dividends.

The company’s chart of accounts follows:

101 Cash 401 Storage Fees Earned

106 Accounts Receivable 606 Depreciation Expense—Buildings

124 Office Supplies 622 Salaries Expense

128 Prepaid Insurance 637 Insurance Expense

173 Buildings 640 Rent Expense

174 Accumulated Depreciation—Buildings 650 Office Supplies Expense

209 Salaries Payable 684 Repairs Expense

307 Common Stock 688 Telephone Expense

318 Retained Earnings 901 Income Summary

319 Dividends

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

retained earnings for the month of July and the balance sheet at July 31, 2017.

6. Prepare journal entries to close the temporary accounts and post these entries to the ledger.

7. Prepare a post-closing trial balance.

Short answer

The balance of the cash ledger is $22,850.

Step-by-step solution

Definition of ledger

The ledger is an account used to record the balance sheet and income statement.

Ledger Accounts

Cash
Date	Debit	Credit	Balance
July 1	$30,000		$30,000
July 2		$2,000	$28,000
July 5		$2,400	$25,600
July 10		$7,200	$18,400
July 14		$1,000	$17,400
July 24	$9,800		$27,200
July 28		$1,000	$26,200
July 29		$950	$25,250
July Tel. 30		$400	$24,850
July 31		$2,000	$22,850

Accounts Receivable
Date	Debit	Credit	Balance
July 31 Adj.	$1,150		$1,150

Office Supplies
Date	Debit	Credit	Balance
July 5	$2,400		$2,400
July 31 Adj.		$875	$1,525

Prepaid Insurance
Date	Debit	Credit	Balance
July 10	$7,200		$7,200
July 31 Adj.		$400	$6,800

Building
Date	Debit	Credit	Balance
July 1	$150,000		$150,000

Accumulated Depreciation- Building
Date	Debit	Credit	Balance
July 31 Adj.		$1,500	$1,500

Salaries Payable
Date	Debit	Credit	Balance
July 31 Adj.		$100	$100

Shareholder Equity
Date	Debit	Credit	Balance
July 1		$180,000	$180,000
July 31 Income		$725	$725
July 31	$2,000		$178,725

Dividend
Date	Debit	Credit	Balance
July 31	$2,000		$2,000
July 31Closing		$2,000	$0

Commission Earned
Date	Debit	Credit	Balance
July 24		$9,800	$8,000
July 31 Adj.		$1,150	$10,950
July 31 Closing	$10,950		$0

Salaries Expense
Date	Debit	Credit	Balance
July 14	$1,000		$1,000
July 28	$1,000		$2,000
Jjuly 31 Adj.	$100		$2,100
July 31 Closing		$2,100	$0

Depreciation Expense- Computer Expense
Date	Debit	Credit	Balance
July 31 Adj.	$1,500		$1,500
July 31 Closing		$1,500	$0

Insurance Expense
Date	Debit	Credit	Balance
July 31 Adj.	$400		$400
July 31 Closing		$400	$0

Rent Expense
Date	Debit	Credit	Balance
July 31 Adj.	$2,000		$2,000
July 31 Closing		$2,000	$0

Office Supplies Expense
Date	Debit	Credit	Balance
July 31 Adj.	$875		$875
July 31 Closing		$875	$0

Repairs Expense
Date	Debit	Credit	Balance
July 31 Adj.	$950		$950
July 31 Closing		$950	$0

Telephone Expense
Date	Debit	Credit	Balance
July 30 Adj.	$400		$400
July 31 Closing		$400	$0

Income Summary
Date	Debit	Credit	Balance
July 31 Rev		$10,950
July 31 Exp.	$8,225
July 31Closing	$2,725