P2-3B Slowhand Services was formed on May 1, 2010.

The following transactions took

place during the first month.
Transactions on May 1:
1. Eric Clapton invested $50,000 cash in the company, as its sole owner.
2. Hired two employees to work in the warehouse. They will each be paid a salary of
$2,800 per month.
3. Signed a 2-year rental agreement on a warehouse; paid $24,000 cash in advance for
the first year.
4. Purchased furniture and equipment costing $30,000. A cash payment of $10,000 was
made immediately; the remainder will be paid in 6 months.
5. Paid $1,800 cash for a one-year insurance policy on the furniture and equipment.

Transactions during the remainder of the month:

6. Purchased basic office supplies for $500 cash.
7. Purchased more office supplies for $1,500 on account.
8. Total revenues earned were $20,000—$8,000 cash and $12,000 on account.
9. Paid $400 to suppliers for accounts payable due.
10. Received $3,000 from customers in payment of accounts receivable.
11. Received utility bills in the amount of $200, to be paid next month.
12. Paid the monthly salaries of the two employees, totalling $5,600.

Instructions Prepare journal entries to record each of the events listed

Slowhand Services
Journal entries

Date Particulars Ref. Debit Credit

2010 1.Cash 50000
May 1 Capital 50000
(Eric Clapton invested cash in her own
firm)
2. Hiring employees has no financial
effect on business, so there will be no
entry
3.Prepaid Rent 24000
Cash 24000
(Paid prepaid rent in cash for 1 year)
4. Furniture and equipment 30000
Cash 10000
Accounts Payable 20000
(Purchased Furniture and equipment in
cash and on account)
5. Prepaid Insurance 1800
Cash 1800
(Paid insurance on the furniture and
 equipment for 1 year in advance)
6. Supplies 500
Cash 500
(Purchased office supplies in cash)
7. Supplies 1500
Accounts payable 1500
(Purchased office supplies on account)
8. Cash 8000
Accounts receivable 12000
Service Revenue 20000
(Earned service revenue in cash and on
account)
9. Accounts payable 4000
Cash 4000
(Paid Supplier for accounts payable
due)
10.Cash 3000
Accounts receivable 3000
(Received cash from customers in
payment of accounts receivable)
11. Utility expense 200
Accounts payable 200
(Received utility bills to be paid next
month)
12.Salary expense 5600
Cash 5600
(Paid salary expenses in cash)

In the book of Slowhand Services

Ledger accounts
Cash

Date Particulars Ref Debit Credit Balance

2010 1.Capital 50000 50000
May 1 3. Prepaid Rent 24000 26000
4. Furniture and equipment 10000 16000
5. Prepaid Insurance 1800 14200
6. Supplies 500 13700
8. Service Revenue 8000 21700
9. Accounts payable 4000 17700
10. Accounts receivable 3000 20700
12. Salary expense 5600 15100
 Capial
Date Particulars Ref Debit Credit Balance
2010 1. Cash 50000 (50000)
May 1

Prepaid Rent
Date Particulars Ref Debit Credit Balance
2010 3. Cash 24000 24000
May 1

Furniture and equipment

Date Particulars Ref Debit Credit Balance

2010 4.Cash 10000 10000
May 1 Accounts Payable 20000 30000

Accounts Payable

Date Particulars Ref Debit Credit Balance

2010 4. Furniture and equipment 20000 (20000)
May 1 7. Supplies 1500 (21500)
9. Cash 4000 (17500)
11. Utility expense 200 (17700)

Prepaid Insurance

Date Particulars Ref Debit Credit Balance

2010 5. Cash 1800 1800
May 1
 Supplies

Date Particulars Ref Debit Credit Balance

2010 6. Cash 500 500
May 1 7. Accounts payable 1500 2000

Accounts receivable

Date Particulars Ref Debit Credit Balance

2010 8. Service Revenue 12000 12000
May 1 10. Cash 3000 9000

Service Revenue

Date Particulars Ref Debit Credit Balance

2010 8. Cash 8000 (8000)
May 1 Accounts receivable 12000 (20000)

Utility expense
Date Particulars Ref Debit Credit Balance
2010 11. Accounts payable 200 200
May 1

Salary expense
Date Particulars Ref Debit Credit Balance
2010 12. Cash 5600 5600
May 1
Date Particulars Ref Debit Credit Balance