Donegan’s Lawn Care Service began operations in July 2011. The company uses the following

general ledger accounts:

Cash                               Capital Stock

 

 

 

Accounts Receivable  Retained Earnings Office Supplies Mowing Revenue Mowing Equipment Salaries Expense Accounts Payable                                        Fuel Expense Notes Payable

The company engaged in the following transactions during its first month of operations:

July 18     Issued 500 shares of capital stock to Patrick Donegan for $1,500.

July 22     Purchased office supplies on account for $100.

July 23                Purchased mowing equipment for $2,000, paying $400 cash and issuing a 60-day note payable for the remaining balance.

July 24     Paid $25 cash for gasoline. All of this fuel will be used in July.

July 25     Billed Lost Creek Cemetery $150 for mowing services. The entire amount is due July 30.

July 26                Billed Golf View Condominiums $200 for mowing services. The entire amount is due August 1.

July 30     Collected $150 from Lost Creek Cemetery for mowing services provided on July 25.

July 31     Paid $80 salary to employee Teddy Grimm for work performed in July.

a.       Record each of the above transactions in general journal form. Include a brief explanation of the transaction as part of each journal entry.

b.       Post each entry to the appropriate ledger accounts (use the T account format illustrated in Exhibit 3–8 on page 108).

c.       Prepare a trial balance dated July 31, 2011.

d.       Explain why the Retained Earnings account has a zero balance in the trial balance.