Question 5: 10 marks (25 minutes) B Sweet Dreams is a manufacturer of matresses and it was incorporated on January 2, 2022. The following transactions happened during the year ended December 31, 2021. 1 On January 2, 2022, the owners Sleepy & Snoozy Dreams, each invested $300,000 in the company. 0 8 9 2 3 4 10 11 12 5 13 6 14 15 16 7 17 18 19 20 21 22 On January 2nd, Sweet Dreams signed a two-year lease contract to rent a building which will be used as the main manufacturing facility. The contract required Sweet Dreams to pre- pay the entire amount upfront on January 2, 2022. Monthly rent is $4,800 per month. On March 1, Sweet Dreams purchased manufacturing equipment at a cost of $180,000. Sweet Dreams paid $80,000 in cash and the rest will be paid next year. The equipment has a useful life of 8 years and $5,000 residual value. The company uses straight line method of depreciation. On April 1, Sweet Dreams borrowed $350,000 from a bank. The loan is a 4-year with 4% interest rate. The interest is payable on the first day of each month, beginning May 1st. On April 15, Sweet Dreams purchased inventory of $270,000 from suppliers on account. On May 1, Sweet Dreams received an order to manufacture 500 matresses for a college dorm. The customer paid $20,000 in advance. The matresses were delivered at the end of August, 2022. The cost of making the matresses was $8,000. The company uses a perpetual inventory system. Ignore HST for this sale. The following expenses were paid during the year. Salaries and wages expense Rent expense Interest expense 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, 2022. 23 24 25 26 110,000 55,000 9,333