Question

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

Theodore McMahon opened a law office on April 1, 2018. During the first month of operations, the business completed the following transactions:

Apr. 1 McMahon contributed \(70,000 cash to the business, Theodore McMahon, Attorney. The business issued common stock to McMahon.

3 Purchased office supplies, \)1,100, and furniture, \(1,300, on account.

4 Performed legal services for a client and received \)2,000 cash.

7 Purchased a building with a market value of \(150,000, and land with a market value of \)30,000. The business paid \(40,000 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 semi monthly salary, \(1,200.

16 Paid for the office supplies purchased on April 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 \(1,700.

25 Received a bill for utilities, \)650. The bill will be paid next month.

28 Received cash on account, \(1,100.

29 Paid \)3,600 cash for a 12-month insurance policy starting on May 1.

29 Paid assistant’s semi monthly salary, \(1,200.

30 Paid monthly rent expense, \)2,100.

30 Paid cash dividends of $3,200.

Requirements 4. Prepare the trial balance of Theodore McMahon, Attorney, at April 30, 2018.

Short answer

Common stock is the stock that shows ownership of the business and the required trial balance is prepared.

Step-by-step solution

Definition of common stock

The common stock is defined as the financial instrument representing the company's ownership.

Preparing a trial balance

Terrence Murphy
Trial Balance
January 18, 2018
Account Title	Debit ($)	Credit ($)
Cash	$23,700
Accounts Receivables	$1,000
Office Supplies	$1,100
Prepaid Insurance	$3,600
Land	$30,000
Building	$150,000
Furniture	$1,300
Accounts Payable		$3,500
Utilities Payable		$650
Notes Payable		$140,000
Common Stock		$70,000
Dividends	$3,200
Service Revenue		$6,800
Salaries Expense	$2,400
Rent Expense	$2,100
Utilities Expense	$650
Total	$220,950	$220,950