Transaction Analysis

Mavtech: A Comprehensive Example

Rachel started Mavtech Inc, a computer retail business on September 1, 2015. What follows is description of significant events that affected Mavtech Inc during September 2015.

On September 1, Mavtech issued 6000 shares at par to Rachel for cash. The par value of each share is $10.

On September 1, Mavtech borrowed $72,000 from a bank. The interest rate on the loan is 10% per annum. Interest is payable every year, the first interest payment being due for payment on September 1, 2016. The principal amount that was borrowed is due in one single repayment on September 1, 2019.

On September 1, Mavtech paid $6,000 toward rent on the store for the rest of 2015. The rent includes all utilities.

On September 1, Mavtech acquired furniture and fixtures for $14,000 and made a down payment of $3,000. The remaining payment will be made in October. The furniture and fixtures have an estimated useful life of 5 years, at the end of which they are expected to be sold for $2,000.

On September 1, Mavtech acquired 4 cash registers for $6,000 in cash.This equipment has a useful life of 3 years after which they are expected to be sold for $600.

On September 9, Mavtech paid $30,000 in advance to suppliers to buy 30 computers.

On September 10, Mavtech paid $450 and bought office supplies inventory.

The computers that were paid for on September 9th were delivered to Mavtech on September 14.

On September 17, a customer placed an order on Mavtech for 25 computers for a total price of $31,000.

On September 21, Mavtech hired an employee. The employee's wage was fixed at $2,400 per month. The employee will be paid every month on the 21st. The first payment will be made on October 21.

On September 22, Mavtech purchased an additional 40 computers for $40,000 on credit, due for payment on October 12.

Computers pertaining to the order placed on September 17, were delivered to the customer on September 27. The customer agreed to pay in five days.

On September 28, Mavtech purchased office supplies inventory for $350 by paying cash.

On September 29, Mavtech sold 15 computers at a total price of $20,700 for cash.

Miscellaneous expenses of $650 were incurred during September. These expenses were paid in cash.

On September 29th, Mavtech received $5,400 as payment in advance from a customer for 3 computers to be delivered on October 4.

On September 30, Rachel took $500 from Mavtech as dividends in cash.

Required:

Prepare journal entries for all transactions listed above.

Post those entries to t-accounts and Need an unadjusted trial balance.

Prepare journal entries for any adjusting entries required.When doing so, consider the following additional information:

At the end of the day on September 30, Rachel counted the office supplies inventory and found that $200 worth of inventory was on hand.

Rachel figured that the income tax on the profits Mavtech Inc made during September would be $450. The tax will be paid to the IRS only in December 2015

Need an adjusted trial balance

Prepare the financial statements for the month.

Prepare closing journal entries and a post-closing trial balance.

Mavtech: October 2015 Transactions

The transactions below pertain to Mavtech's second month (October) of operations.

Paid $11,000 to the supplier to complete payment on the furniture and fixtures bought on September 1, 2015 (refer to transaction 4 of September).

Delivered the 3 computers to the customer for which advance payment of $5,400 was received in September.The full invoice value of the sale was received in advance.

Paid $40,000 to the supplier to complete payment of the 40 computers that were bought on September 22, 2015 (refer to transaction 11 of September).

The customer who owed $31,000 (refer to transaction 12 of September) paid the amount to Mavtech.

Purchased and received office supplies for $1,200 by paying cash in October.

Purchased 60 computers in October for $1,000 each, and paid $25,000 cash to the supplier, with the remaining amount to be paid in November.

Sold 50 computers in October for $1,400 each, received $20,000 cash, with the remaining amount to be collected in November.

Paid $2,400 to the employee on October 21st towards wages for the period September 21 to October 20th.

Rachel took $600 as dividends in cash from Mavtech.

On October 31st, Rachel realized that most of her business was commercial.She did not need as many cash registers.So, she sold three of the four cash registers for $4,000 cash.

Required:

Prepare journal entries for all transactions listed above.

Post those entries to t-accounts and need an unadjusted trial balance.

Prepare journal entries for any adjusting entries required.When doing so, consider the following additional information:

At the end of the day on October 31st, Rachel counted the office supplies inventory and found that $500 worth of inventory was on hand.

Rachel figured that the income tax on the profits Mavtech Inc made during October would be $500. The tax will be paid to the IRS only in December 2015

need an adjusted trial balance

Prepare the financial statements for the month.

Prepare closing journal entries and a post-closing trial balance.

#2 29 (82) 10812 7129 98 ~ % " X V C D E G H M 0 P Mavtech: Trial Balances, Adjustment entries and Closing entries Unadj TB Adjusting entries Adjusted TB Closing Entries Post Closing TB Income Statement for the month ending Sep 30, 20 Account Debit Credit Debit Credit Debit Credit Debit Credit Debit Credit Sales Revenue 51,700 Notes Payable 72,000 72,000 0 72,000 Operating Profit 7,800 common stock 60,000 60,000 0 60,000 Less: Interest Exp 600 Dividends 500 500 500 Income before IT 7,200 Sales Revenue 51,700 51,700 51,700 Less: IT exp 450 COGS 40,000 40,000 40,000 Net Income 6,750 Miscellaneous Exp 650 650 650 iSupplies Expense 600 600 600 Statement of Retained Earnings Rent Exp 1.500 1,500 1,500 0 Beg. Bal of Retained Earnings Depreciation Exp 350 350 350 Add: Net income 6,750 Accumulated Dep - F& 200 200 0 200 Total 6750 Accumulated Dep -Equip 150 150 150 Less : Dividends 500 Interest Exp 600 600 600 Ending Bal 6,250 Accrued Exp Payable 1,850 1,850 1,850 Income Tax Exp 450 450 450 Balance Sheet as at Sep 30, 2015 Salaries & Wages Exp 800 800 800 0 Assets Debit Income Summary 51,700 51,700 Cash 111,150 Retained Earnings 500 6,750 6,250 AR 31,000 Inventory 30,000 Supplies Inventory 200 TOTAL 240,100 240,100 4,300 4,300 242,300 242,300 103,900 103,900 196,850 196,850 Prepaid rent 4,500 Current Assets 176,850 Furniture and Fixtures 14,000 Closing entries as journal entries Less Acc Dep - F&F * 200 13,800 Debit Credit Equipment 5,000 Closing revenues Less Acc Dep - Equip 150 5,850 8 Sales Revenue 51,700 Total Assets 196,500 Income Summary 51,700 Liabilities Close Expenses AP 51,000 Income Summary 44.950 Unearned Revenue 5,400 COGS 40,000 Accrued Exp Payable 1,850 Miscellaneous Exp 650 Current Liabilities 58,250 Supplies Expense 600 Notes Payable 72,000 Rent Exp 1.500 total Liabilities 130,250 Depreciation Exp 350 Interest Exp 600 Stock Holders Equity Income Tax Exp 450 Common Stock 60,000 Salaries & Wages Exp 800 Retained Earnings 6,250 Total SE 66,250 Close Income Summary to Retained Earnings 53 Income Summary 6,750 Total Liabilities + SE 196.500 54 Retained Earnings 6,750 55 56 Close Dividends to Retained Earnings 57 Retained Earnings 500 58 | Dividends 500 59 60 61 62 63