Question 2. 13.5 marks (approx 24 minutes) Enter your answer below Ella Co. is a gym...

Transcribed Image Text:

Question 2. 13.5 marks (approx 24 minutes) Enter your answer below Ella Co. is a gym which was incorporated on January 2, 2020. The following transactions happened during the year ended December 31, 2020. 1 On January 2nd, the owner invested $250,000 to start the gym. 2 On January 2nd, Ella signed a two-year lease contract to rent a building which will be used as the main facility. The first month rent of $1,000 was paid in advance on Jan 2. 3 On February 28, Ella borrowed $120,000 from a local bank. The loas is a 3-year with 5% interest rate. The interest is payable on the first day of each month, beginning April 1st. 4 On March 1, Ella purchased equipment at a cost of $55,000 on account. The equipment has a useful life of 10 years and $1,000 residual value. 5 On March 31, Ella collected $70,000 membership fees from its customers. The membership fees cover a full year. 6 The following expenses were paid during the year. Salaries and wages expense Rent expense Interest expense 78,000 11,000 4,500 7 On May 1, Ella purchased a two-year insurance policy at a cost of $3,600 which takes effect on May 1. 8 On September 1st, Ella invested in 10,000 common shares of Ava Inc. The shares are classified as FVTOCI investments. The common shares of Ava were traded at $9 per share on September 1, 2020. The shares are traded at $15 per share on December 31 2020. Required: Prepare journal entries to record the above transactions. For each entry, write the initial entry and then, if necessary, write an adjusting entry at December 31, 2020. Question 2. 13.5 marks (approx 24 minutes) Enter your answer below Ella Co. is a gym which was incorporated on January 2, 2020. The following transactions happened during the year ended December 31, 2020. 1 On January 2nd, the owner invested $250,000 to start the gym. 2 On January 2nd, Ella signed a two-year lease contract to rent a building which will be used as the main facility. The first month rent of $1,000 was paid in advance on Jan 2. 3 On February 28, Ella borrowed $120,000 from a local bank. The loas is a 3-year with 5% interest rate. The interest is payable on the first day of each month, beginning April 1st. 4 On March 1, Ella purchased equipment at a cost of $55,000 on account. The equipment has a useful life of 10 years and $1,000 residual value. 5 On March 31, Ella collected $70,000 membership fees from its customers. The membership fees cover a full year. 6 The following expenses were paid during the year. Salaries and wages expense Rent expense Interest expense 78,000 11,000 4,500 7 On May 1, Ella purchased a two-year insurance policy at a cost of $3,600 which takes effect on May 1. 8 On September 1st, Ella invested in 10,000 common shares of Ava Inc. The shares are classified as FVTOCI investments. The common shares of Ava were traded at $9 per share on September 1, 2020. The shares are traded at $15 per share on December 31 2020. Required: Prepare journal entries to record the above transactions. For each entry, write the initial entry and then, if necessary, write an adjusting entry at December 31, 2020.