The Sibelius Company was incorporated on 1 March X1. It carries a commercial activity. The following transactions were undertaken during the first month of operation of Sibelius Co.
1 March 1 Sibelius company was incorporated with a share capital of 600 CU. A bank account was opened with Commercial Credit Bank.
2 March 6 Purchased merchandise on credit: 350 CU.
3 March 12 Paid telephone expense for the month of March: 50 CU.
4 March 20 Sold merchandise for 500 CU (260 CU cash and 240 CU on credit). (The purchase price of the merchandise sold was 300 CU).
5 March 29 Paid fully the supplier of merchandise (see transaction 2).
6 March 30 Organized a physical inventory and computed an ending inventory of 50 CU.
Required
Prepare the journal entries for the month of March X1.
=> The company wants to compute the income that reflects the economic situation at 31 March. Consequently, the ending inventory must appear in the records of the company.
=> In order to record purchases, sales and inventory, you can choose to record the purchases of merchandise either through the inventory (a balance sheet account and merchandise sold is valued as COGS) or directly as a purchase (an income statement account modified by the change in inventory to get the value of merchandise sold). You must indicate your choice of method in handling purchases clearly at the top of your journal (see appendix).
=> A partial excerpt from the chart of accounts of Sibelius Company is given below (note that the authorized accounts are provided in alphabetical order without reference to their expected ending balance):
Accounts payable
Accounts receivable
Capital
Cash in bank
Change in inventories (if purchases recorded in the income statement)
Cost of goods sold or COGS (if purchases recorded in the balance sheet)
Inventories
Purchases of merchandise (if purchases recorded in the income statement)
Sales of merchandise
Telephone expenses