Question
Mr. Josh Edinburgh started a company titled Ryerson Computers that specialized in computer equipment and accessories. In the month of January 2020, the following transactions
Mr. Josh Edinburgh started a company titled “Ryerson Computers” that specialized in computer equipment and accessories. In the month of January 2020, the following transactions took place:
January 1: The owner personally borrowed $100,000 from a bank. He invested money in the business.
January 2: Purchase of specialized equipment $15,000. 50% of this amount was paid in cash and the remaining was on credit.
January 3: Rented an office space for conducting administrative activities. The office will cost $5000 per month.
January 5: Purchase 3-year insurance policy for $15,000.
January 6: Purchased office supplies $10,000. No cash was paid for the transaction.
January 7: Placed an order for computer parts worth $5000 to a local supplier. The supplier will deliver the parts in May.
January 8: Made an advertisement in Facebook. The advertisement cost $1000. The entire amount was settled in cash.
January 8: Hired 3 employees for the office. Each will be paid $1000 per month.
January 10: Sold 5 computers for $100,000. 60% of this amount was received in cash and the remaining on credit.
January 12: Advance cash of $5000 was received for computer parts to be delivered in March, 2020.
January 15: The office rent, $5000, was paid in cash. Employees’ salary $3000 incurred and was paid
in cash.
January 20: 50% of all of the accounts payable due in January was paid in cash.
January 30: Owner Withdrew $1000 from the business.
January 31: Sold 10 computers for $50,000. No cash was received for this transaction.
January 31: Borrowed $50,000 from the bank @12% per year interest rate.
List of account titles to be used: Owner’s capital, Cash, Equipment, Accounts Payable, Prepaid Insurance, Advertisement expense, Rent Expense, Salaries and wages expense, Bank Loan, Sales Revenue, Unearned Sales Revenue, Owner’s drawing, Supplies.
Requirements:
- Prepare Journal entries based on the transactions listed above for January, 2020.
- Post the journal entries to the ledger accounts
- Prepare a trial-balance at January 31, 2020.
- Prepare adjusting entries based on the following information at the end of March 31,2020:
- The equipment has useful life of 5 years with a salvage value of $5000.
- $5000 of the office supplies has been used.
- Prepaid insurance expired for 3 months.
- 50% of the unearned sales revenue has been earned.
- Interest accrued on bank loan.
- Salaries accrued for $2000, but not paid.
List of accounts to be used for adjusting entries: Depreciation expense, Accumulated depreciation-equipment, Supplies expense, Insurance expense, Interest expense, Interest payable, salaries and wages payable.
Note: Adjusting entries are prepared quarterly.
- Prepare adjusted trial balance at March 31, 2020.
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