Transaction Analysis, T Accounts, and Trial Balances

Hiroshi Mori began an upholstery cleaning business on October 1 and engaged in the following transactions during the month:

Oct. 1 Began business by depositing $12,000 in a bank account in the name of the corporation in exchange for 12,000 shares of $1 par value common stock.

2 Ordered cleaning supplies, $1,000.

3 Purchased cleaning equipment for cash, $2,800.

4 Made two months’ van lease payment in advance, $1,200.

7 Received the cleaning supplies ordered on October 2 and agreed to pay half the amount in 10 days and the rest in 30 days.

9 Paid for repairs on the van with cash, $80.

12 Received cash for cleaning upholstery, $960. Oct. 17 Paid half the amount owed on supplies purchased on October 7, $500.

21 Billed customers for cleaning upholstery, $1,340.

24 Paid cash for additional repairs on the van, $80.

27 Received $600 from the customers billed on October 21.

31 Declared and paid a dividend of $700.

Required

1. Set up the following T accounts: Cash; Accounts Receivable; Cleaning Supplies; Prepaid Lease; Cleaning Equipment; Accounts Payable; Common Stock; Dividends; Cleaning Revenue; and Repair Expense.

2. Record transactions directly in the T accounts. Identify each entry by date.

3. Prepare a trial balance for Mori Upholstery Cleaning, Inc., as of October 31, 20xx.

4. User insight: Compare and contrast how the issues of recognition, valuation, and classification are settled in the transactions of October 7 and 9.