Darren started a business on 1 February 20–8. He transferred $120,000 from his private bank account to a business bank account. He obtained a long-term loan from his family of $50,000 which was also paid into the business bank account.

On the same date he purchased premises, $125,000, shop fittings, $17,500, and inventory, $5,320, all of which were paid by credit transfer.

a. Prepare the opening journal entry on 1 February 20–8. A narrative is required.

The following transactions took place in August 20–8:

August 1 Darren took goods, $440, from the business for personal use.
12 Darren transferred his personal motor vehicle to the business at a valuation of $16,250.

b. Prepare journal entries to record these transactions. Narratives are required.

Darren made year-end transfers to the income statement on 31 January 20–9 and also made some year-end adjustments.

c. Prepare journal entries to record the following. Narratives are required.

1. Writing off a debt of $150 owed by Paula as irrecoverable.
2.  Transferring the balance of the irrecoverable debts account to the income statement.
3. Transferring the balance of the purchases returns account, $1,075, to the income statement.
4.  Transferring the balance of the operating expenses account, $13,620, to the income statement.
5. Creating a provision for doubtful debts of $550.
6.  Depreciating shop fittings by 10% on cost.