PROBLEM $05-$ TRANSACTION ANALYSIS

In T$-$account form, set up the balances for the following account for Watson Limited at January$120$X$1.$ For

each transaction $(a-g),$ make the appropriate journal entry and post each entry to the proper T$-$accounts.

Following these two steps, prepare an unadjusted trial balance at month$-$end.

Cash $$120,000$

Land $60,000$

Notes Payable $64,000$

Common Shares, No Par Value $400,000$

Notes Receivable $40,000$

Building $280,000$

Interest Payable $3,200$

Retained Earnings $72,800$

Merchandise Inventory $200,000$

Accounts Payable $80,000$

Bonds Payable $80,000$

Transactions:

a$.$ The note receivable of $$40,000$ was collected

b$.$ The note for $$64,000$ and related accrued interest of $$3,200$ were paid on January $2$

c$.$ The January $1$ balance in Accounts Payable was paid during the month of January.

d$.$ Bonds in the amount of $$32,000$ were issued at face value and the proceeds were used to pay for an

addition to the building.

e$.$ Merchandise inventory costing $$120,000$ was acquired with payment of $$64,000$ in cash and the remainder

due in $30$ days on open account.

f$.$ The plot of land costing $$60,000$ was sold for $$60,000.$

g$.$ An additional $800$ common shares were sold for $$125$ per share.