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Creative Designs, a firm providing art services for advertisers, began business on June 1. The following...

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Accounting

Creative Designs, a firm providing art services for advertisers,began business on June 1. The following accounts in its generalledger are needed to record the transactions for June: Cash;Accounts Receivable; Supplies; Office Equipment; Accounts Payable;Common Stock; Dividends; Service Fees Earned; Rent Expense;Utilities Expense; and Salaries Expense. a. Using the accountingequation, record each of the transactions in columnar format. b.Use journal entries to record the following transactions for Junein the general journal. June 1 Lisa Ryan invested $22,000 cash tobegin the business; she received common stock for her investment. 2Paid rent for June, $1,950. 3 Purchased office equipment onaccount, $7,400. 6 Purchased art materials and other suppliescosting $4,800; paid $2,800 down with the remainder due within 30days. 11 Billed clients for services, $10,000. 17 Collected $4,250from clients on account. 19 Paid $4,000 on account to officeequipment company (see June 3 transaction). 25 Lisa Ryan received a$3,000 dividend. 30 Paid utility bill for June, $1,350. 30 Paidsalaries for June, $3,500.

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SOLUTION

A. Using accounting equation-

Date Cash + Accounts receivable + Supplies + Office equipment = Accounts payable + Common stock + Retained earnings
Jun1 22,000 22,000
Jun2 (450) (450)
Jun3 7,400 7,400
Jun6 (2,800) 4,800 2,000
Jun11 10,000 10,000
Jun17 4,250 (4,250)
Jun19 (4,000) (4,000)
Jun25 3,000 3,000
Jun30 (1,350) (1,350)
Jun30 (3,500) (3,500)
Total 17,150 5,750 4,800 7,400 5,400 22,000 7,700

B. Journal entries-

Date Accounts titles and Explanation Debit ($) Credit ($)
June 1 Cash 22,000
Common stock 22,000
June 2 Rent expense 1,950
Cash 1,950
June 3 Office equipment 7,400
Accounts payable 7,400
June 6 Supplies 4,800
Cash 2,800
Accounts payable 2,000
June 11 Accounts receivable 10,000
Service revenue 10,000
June 17 Cash 4,250
Accounts receivable 4,250
June 19 Accounts payable 4,000
Cash 4,000
June 25 Cash 3,000
Dividend 3,000
June 30 Utility expense 1,350
Cash 1,350
June 30 Salary expense 3,500
Cash 3,500

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