Question

The following transactions occurred during March 2018 for the Wainwright Corporation. The company owns and operates a wholesale warehouse. 1. Issued 40,000 shares of common stock in exchange for $400,000 in cash. 2. Purchased equipment at a cost of $60,000. $15,000 cash was paid and a note payable was signed for the balance owed. 3. Purchased inventory on account at a cost of $122,000. The company uses the perpetual inventory system. 4. Credit sales for the month totaled $170,000. The cost of the goods sold was $102,000. 5. Paid $5,500 in rent on the warehouse building for the month of March. 6. Paid $6,550 to an insurance company for fire and liability insurance for a one-year period beginning April 1, 2018. 7. Paid $102,000 on account for the merchandise purchased in 3. 8. Collected $76,500 from customers on account. 9. Recorded depreciation expense of $1,500 for the month on the equipment. Prepare journal entries to record each of the transactions listed above

Answer 1

Answer and Explanation:

The Journal entry is shown below:-

1. Cash Dr, $400,000  

   To Common Stock capital $400,000

(Being cash is recorded)

2. Equipment Dr, $60,000  

     To Cash $15,000

     To Note payable $45,000

(Being equipment is recorded)

3. Inventory Dr, $122,000  

    To Accounts payable $122,000

(Being purchase of inventory is recorded)

4. Accounts receivable $170,000  

     To Sales revenue $170,000

(Being sales revenue is recorded)

Cost of goods sold Dr, $102,000  

    To Inventory $102,000

(Being cost of goods sold is recorded)

5. Rent expenses Dr, $5,500  

    To Cash $5,500

(Being rent expenses is recorded)

6. Prepaid Insurance Dr, $6,550  

     To Cash $6,550

(Being insurance is recorded)

7. Accounts Payable Dr, $102,000  

     To Cash $102,000

(Being accounts payable is recorded)

8. Cash Dr, $76,500

    To Accounts receivable $76,500

(Being cash is recorded)

9. Depreciation expenses Dr, $1,500  

    To Accumulated depreciation $1,500

(Being depreciation expenses is recorded)