Mario and John, who run the best barber shop in Westchester, decided to expand their business. They sold their old equipment and moved to larger quarters in the Arcadian Mall, doing business as the Arcadian Barber Shop. Record the following transactions in general journal form; then, compute the net profit for the month by subtracting expenses from revenues (do not consider owner withdrawals as expenses).
2013 January
2 Mario and John each invested $ 10,000 in the business.
2 They borrowed $ 24,000 from a local bank. The loan must be repaid over 6 years ( in equal annual installments of $ 4,000 each by December 31), with interest at the rate of 6 percent per annum on the unpaid balance.
2 They paid $ 36,000 for barber chairs and other equipment, including installat ion cost.
2 They paid $ 5,000 in rent for January and February.
3 31 The barber shop collected cash amounting to $ 18,500 for services performed during the month.
31 They paid $ 3,000 in salaries each to barbers Joe and Pat. 31 Mario and John each withdrew $ 3,500 in cash as compensation for their own work.
31 In preparation for month end financial statements, they recorded the following expenses for 1 month:
(a) Depreciation of barber chairs and equipment (estimated life 20 years):
(b) Interest on the bank borrowing: and
(c) Expiration of 1 month rent.
31 Utility bills arrived in the mail: they totaled $ 800. The bills will be paid in February.