Question

Journalizing transactions, posting journal entries to four-column accounts, and preparing a trial balance

Terrence Murphy opened a law office on January 1, 2018. During the first month of operations, the business completed the following transactions:

Jan. 1 Murphy contributed \(78,000 cash to the business, Terrence Murphy, Attorney. The business issued common stock to Murphy.

3 Purchased office supplies, \)600, and furniture, \(1,700, on account.

4 Performed legal services for a client and received \)1,000 cash.

7 Purchased a building with a market value of \(130,000, and land with a market value of \)25,000. The business paid \(25,000 cash and signed a note payable to the bank for the remaining amount.

11 Prepared legal documents for a client on account, \)400.

15 Paid assistant’s semimonthly salary, \(1,120.

16 Paid for the office supplies purchased on January 3 on account.

18 Received \)2,700 cash for helping a client sell real estate.

19 Defended a client in court and billed the client for \(1,800.

25 Received a bill for utilities, \)600. The bill will be paid next month.

29 Received cash on account, \(1,500.

30 Paid \)1,200 cash for a 12-month insurance policy starting on February 1.

30 Paid assistant’s semimonthly salary, \(1,120.

31 Paid monthly rent expense, \)1,800.

31 Paid cash dividends of $2,200.

Requirements

2. Open the following four-column accounts including account numbers: Cash, 101; Accounts Receivable, 111; Office Supplies, 121; Prepaid Insurance, 131; Land, 141; Building, 151; Furniture, 161; Accounts Payable, 201; Utilities Payable, 211; Notes Payable, 221; Common Stock, 301; Dividends, 311; Service Revenue, 411; Salaries Expense, 511; Rent Expense, 521; and Utilities Expense, 531.

Short answer

The notes payable is money owed to financers and the required four-column accounts are prepared in step 2.

Step-by-step solution

Step-by-Step SolutionStep 1: Definition of Notes Payable

The notes payables are defined as the long-term liability which shows the money owed by the company to its financers.

Opening Four-Column Accounts

Cash Account Number – 101
					Balance
Date	Item	PR	Debit	Credit	Debit	Credit

Accounts Receivables Account Number - 111
					Balance
Date	Item	PR	Debit	Credit	Debit	Credit

Office Supplies Account Number - 121
					Balance
Date	Item	PR	Debit	Credit	Debit	Credit

Prepaid Insurance Account Number - 131
					Balance
Date	Item	PR	Debit	Credit	Debit	Credit

Land Account Number - 141
					Balance
Date	Item	PR	Debit	Credit	Debit	Credit

Building Account Number - 151
					Balance
Date	Item	PR	Debit	Credit	Debit	Credit

Furniture Account Number - 161
					Balance
Date	Item	PR	Debit	Credit	Debit	Credit

Accounts Payable Account Number - 201
					Balance
Date	Item	PR	Debit	Credit	Debit	Credit

Utilities Payable Account Number - 211
					Balance
Date	Item	PR	Debit	Credit	Debit	Credit

Notes Payable Account Number - 221
					Balance
Date	Item	PR	Debit	Credit	Debit	Credit

Common Stock Account Number – 301
					Balance
Date	Item	PR	Debit	Credit	Debit	Credit

Dividends Account Number - 311
					Balance
Date	Item	PR	Debit	Credit	Debit	Credit

Service Revenue Account Number - 411
					Balance
Date	Item	PR	Debit	Credit	Debit	Credit

Salaries Expense Account Number - 511
					Balance
Date	Item	PR	Debit	Credit	Debit	Credit

Rent Expense Account Number - 521
					Balance
Date	Item	PR	Debit	Credit	Debit	Credit

Utilities Expense Account Number -531
					Balance
Date	Item	PR	Debit	Credit	Debit	Credit