Financial Accounting: P2-3A Chambers Brokerage Services Inc. was formed on May 1, 2006

Financial Accounting

P2-3A
Chambers Brokerage Services Inc. was formed on May 1, 2006. The following transactions took place during the first month. Transactions on May 1:
1. Stockholders invested $120,000 cash in the company in exchange for stock.
2. Hired two employees to work in the warehouse. They will each be paid a salary of $2,000 per month.
3. Signed a 2-year rental agreement on a warehouse; paid $36,000 cash in advance for the first year. (Hint: The portion of the cost related to May 2006 is an expense for this month.)
4. Purchased furniture and equipment costing $70,000. A cash payment of $20,000 was made immediately; the remainder will be paid in 6 months.
5. Paid $3,000 cash for a one-year insurance policy on the furniture and equipment. (Hint: The portion of the cost related to May 2006 is an expense for this month.) Transactions during the remainder of the month:
6. Purchased basic office supplies for $1,000 cash.
7. Purchased more office supplies for $3,000 on account.
8. Total revenues earned were $30,000—$10,000 cash and $20,000 on account.
9. Paid $800 to suppliers for accounts payable due.
10. Received $5,000 from customers in payment of accounts receivable.
11. Received utility bills in the amount of $400, to be paid next month.
12. Paid the monthly salaries of the two employees, totalling $4,000.

Instructions
(a) Prepare journal entries to record each of the events listed.
(b) Post the journal entries to T accounts.
(c) Prepare a trial balance as of May 31, 2006.
(d) Prepare an income statement and a retained earnings statement for Chambers Brokerage Services for the month ended May 31, 2006, and a balance sheet as of May 31, 2006.
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