The journal entries are:

1) $40,000 Capital contribution

Cash 40,000
Capital 40,000

2) $40,000 Deposit with National

Deposit – National 40,000
Cash 40,000
3) $10,000 Capital contribution
Cash 10,000
Capital 10,000

4) $6,000 furniture purchase

Furniture 6,000
Cash 6,000

5) $1,200 Insurance payment (12 months)

Prepaid Insurance 1,200

Cash 1,200
6) $35,650 deductions from deposit
Oil and grease inventory 6,320
Operating supplies and uniforms 4,130
Equipment 25,200
Deposit 35,650
7) $1500 Lease payment
Lease expense 1,500
Cash 1,500
8) $49,800 Equipment payable
Equipment 49,800
Equipment payable 49,800
9) $108,600 Bank deposits
Cash 108,600
Parking revenue 3,300
Services revenue 105,300
10) $8,230 Inventory purchases (oil and grease)
Inventory 8,230
Cash 8,230
11) $34,560 Payroll payments
Payroll expense 34,560
Cash 34,560
12) $1700 Utilities payments
Utilities expense 1,700
Cash 1,700
13) $6,600 miscellaneous payments
Miscellaneous expenses 6,600
Cash 6,600
14) $26,400 Lease payments
Lease expense 26,400
Cash 26,400
15) $2,490 Equipment payables payments
Equipment payable 2,490
Cash 2,490
16) $4,500 Withdrawals (Knight)
Withdrawals 4,500
Cash 4,500

17) $340 Receivable – parking

Accounts receivable 340
Parking Revenues 340
18) $730 Receivable – local merchant
Accounts receivable 730
Service Revenues 730
19) $2100 Unpaid payroll
Payroll expense 2100
Accrued payroll 2100
20) $350 Unpaid utilities
Utilities expense 350
Accrued utilities 350
21) $9,260 Cost of Sales (oil and grease)1
Cost of Sales 9,260
Inventory 9260
22) $150 Furniture depreciation2
Depreciation expense 150
Accumulated depreciation 150
23) $3,750 Equipment depreciation3
Depreciation expense 3,750
Accumulated depreciation 3,750
24) $400 August parking prepayments
Cash 400
Deferred parking revenue 400
25) $300 Insurance expense4
Insurance expense 300
Prepaid Insurance 300

1
Beginning Inventory $ 6,320
Purchases 8,230
Total Available $14,550
Ending Inventory 5,290
Cost of Sales $9,260
2
($6,000/ 10 years) x .25 = $150
3
($75,000/ 5 years) x .25 = $3,750
4
$1200 x .25 = $300
A) Capital

Knight has made two capital contributions ($40,000 and $10,000.) The total is $50,000.

B) Accumulated depreciation

The accumulated depreciation account is the sum of two amounts ($150 and $3,750.) The
balance is $3,900.

C) Prepaid Asset

The only prepaid asset is prepaid insurance. The balance is $900 ($1200 - $300.) One-quarter
of the insurance coverage benefit has expired ($1200 x .25.)

D) Cash balance

The cash T account is (Journal entry indicated)

Cash
1) 40,000 2) 40,000
4) 10,000 3) 6,000
9) 108,600 5) 1,200
24) 400 7) 1,500
10) 8,230
11) 34,560
12) 1,700
13) 6,600
14) 26,400
15) 2,490
16) 4,500
Balance 25,820

The cash balance is $25,820.

E) Accounts Receivable

Waltham Center is owed $340 by overnight parkers and $730 by local merchants. The accounts
receivable balance is $1070.

F) Liabilities

There are three liabilities at the end of the three month operating period. Two are the current
liabilities accrued payroll $2,100 and accrued utilities $350. The third is the longer term obligation for
the equipment ($47,310.) The liability account balance is $49,760.

Question 2

a) Withdrawals

$4,500 withdrawal

b) Cost of Sales
 See note to cost of sales journal entry.

c) Parking revenues

The amount is $3,640 ($3,300 cash received plus $340 owed.)

d) Lease Expenses

The total amount is $27,900 (May $1500 prepaid flat rental plus $3,000 June – July flat rental
paid plus $23,400 per car $10 payments.)

e) Total Revenues

Total revenues is the sum of parking revenues ($3,640) cash service revenues ($105,300) and
credit service sales ($730.) The amount is $109,670.