Ming Chen began a professional practice on June 1 and plans to prepare financial statements at the end of each month. During June, Ming Chen (the owner) completed these transaction... Ming Chen began a professional practice on June 1 and plans to prepare financial statements at the end of each month. During June, Ming Chen (the owner) completed these transactions: a) Owner invested $60,000 cash in the company along with equipment that had a $15,000 market value. b) The company paid $1,500 cash for rent of office space for the month. c) The company purchased $10,000 of additional equipment on credit (payment due within 30 days). d) The company completed work for a client and immediately collected the $2,500 cash earned. e) The company completed work for a client and sent a bill for $8,000 to be received within 30 days. f) The company purchased additional equipment for $6,000 cash. g) The company paid an assistant $3,000 cash as wages for the month. h) The company collected $5,000 cash as a partial payment for the amount owed by the client in transaction (e). i) The company paid $10,000 cash to settle the liability created in transaction (c). j) Owner withdrew $1,000 cash from the company for personal use. Read more

Steps to Solve

1. Record Owner’s Investment
   Ming Chen invested $60,000 cash and additional equipment with a market value of $15,000.
   This increases assets (Cash + Equipment) and owner’s equity (Owner's Capital).

   • Journal Entry:
     • Debit Cash $60,000
     • Debit Equipment $15,000
     • Credit Owner's Equity $75,000

2. Record Office Rent Payment
   The company paid $1,500 cash for office rent.
   This decreases cash and increases expenses (Rent Expense).

   • Journal Entry:
     • Debit Rent Expense $1,500
     • Credit Cash $1,500

3. Record Purchase of Additional Equipment on Credit
   The company purchased $10,000 of equipment on credit (payment due in 30 days).
   This increases equipment and liabilities (Accounts Payable).

   • Journal Entry:
     • Debit Equipment $10,000
     • Credit Accounts Payable $10,000

4. Record Cash Earned for Completed Work
   The company completed work and immediately collected $2,500 cash.
   This increases cash and owner’s equity (Revenue).

   • Journal Entry:
     • Debit Cash $2,500
     • Credit Revenue $2,500

5. Record Work Completed for Client with Bill Sent
   The company billed a client $8,000 for work completed (payment due in 30 days).
   This increases accounts receivable and owner’s equity (Revenue).

   • Journal Entry:
     • Debit Accounts Receivable $8,000
     • Credit Revenue $8,000

6. Record Purchase of Equipment for Cash
   The company purchased additional equipment for $6,000 cash.
   This decreases cash and increases equipment.

   • Journal Entry:
     • Debit Equipment $6,000
     • Credit Cash $6,000

7. Record Wages Paid to Assistant
   The company paid the assistant $3,000 cash for wages.
   This decreases cash and increases expenses (Wages Expense).

   • Journal Entry:
     • Debit Wages Expense $3,000
     • Credit Cash $3,000

8. Record Collection of Partial Payment from Client
   The company collected $5,000 as a partial payment from the client for previous work.
   This increases cash and decreases accounts receivable.

   • Journal Entry:
     • Debit Cash $5,000
     • Credit Accounts Receivable $5,000

9. Record Payment Made to Settle Liability
   The company paid $10,000 cash to settle the liability from the previous equipment purchase.
   This decreases cash and decreases liabilities (Accounts Payable).

   • Journal Entry:
     • Debit Accounts Payable $10,000
     • Credit Cash $10,000

10. Record Owner’s Withdrawal
    The owner withdrew $1,000 cash for personal use.
    This decreases cash and decreases owner’s equity (Owner's Withdrawals).

• Journal Entry:
  • Debit Owner's Withdrawals $1,000
  • Credit Cash $1,000