Recording transactions II Peerless Company is formed on 1 September x1. A distributor of TV and video equipment, it specialises in the sale of widescreen, high-definition televisions. It enters into the following transactions in September.

1 On 1 September, the firm issues 3,000 shares for 45,000 cash.

2 It leases shop premises for one year from 1 October. The rental payments are structured as follows:

– a fixed monthly charge of 2,000; and

– a variable charge of 1.5% of monthly sales.

It pays three months of the fixed charge in advance on 5 September. (It will not make any variable rental payments until October when sales begin.)

32 PART 1 • FOUNDATIONS 3 It acquires shop fittings on 5 September. The bill for the fittings is 14,000 but the supplier gives a discount of 1,000 since the firm makes a full payment on 10 September.

4 It purchases merchandise (televisions for resale) on account at a cost of 38,000 on 15 September.

5 It receives a cheque of 800 from a customer on 20 September as a deposit on an order for a topof-

the-line television set. The contract price is 4,000.

6 The labour costs of installing the fittings in 3 are 6,000 and are paid in cash on 25 September.

7 The company hires two employees who will begin work in the shop on 1 October. It makes a cash advance of 300 to one of the employees on 27 September.

8 It purchases office equipment costing 7,400 on 30 September. It pays a deposit of 2,000 in cash on that date and agrees to pay the balance within 30 days.

9 Peerless’s lawyer submits a bill amounting to 9,000 for legal services in connection with the formation of the firm. The company gives her 600 shares in payment.

Required

(a) Record the above transactions on a worksheet similar to that in Exhibits 2.1 and 2.2.

(b) Prepare a balance sheet for Peerless Company at the close of 30 September, prior to the opening of the company’s first shop on 1 October.

Check figures:

Cash at 30/9 18,500 Total assets at 30/9 98,200 AppenedixLO1