Journal entries, ledger posting and trial balance
As we discovered in this chapter, Sam Beckett and Carrie Blixen have established a language school in mainland Europe. Listed below is a summary of the financial transactions and events that took place in year 1, the first year of the school's operation.
1 The Out of Babel Company was formed in early January year 1. Beckett, Blixen and associates invested 30,000 in it.
2 The company leased premises for five years. It paid two years' rent totalling 16,000 in advance in January.
3 In the same month the company spent 10,000 in cash to acquire equipment for a language laboratory.
4 During the year 300 students enrolled at the school. They attended, on average, ten sessions at a per-session charge of 20. Of the total fees of 60,000, 40% came from students sponsored by organisations which were billed for the tuition provided. The other 60% of students paid cash for each session attended.
5 The company hired two language teachers during the year. Total salary payments in the year amounted to 40,000. All year 1 teaching services were paid for by year-end.
6 The company bought supplies costing 4,000 on credit.
7 Utility and miscellaneous expenses amounted to 5,000 in year 1. All were paid in cash by 31 December.
8 Of the 24,000 owing to the company for sponsored students' tuition, all but 6,000 was collected by year-end.
9 The company paid suppliers 2,000 of the amount it owed them.
Required
(a) Prepare journal entries to record each of the above transactions.
(b) Post the entries to the ledger accounts.
(c) Draw up a trial balance at 31 December year 1.