Question

he following transactions occurred during March 2021 for the Wainwright Corporation. The company owns and operates a wholesale warehouse. Issued 41,000 shares of common stock in exchange for $410,000 in cash. Purchased equipment at a cost of $51,000. $15,500 cash was paid and a notes payable to the seller was signed for the balance owed. Purchased inventory on account at a cost of $100,000. The company uses the perpetual inventory system. Credit sales for the month totaled $175,000. The cost of the goods sold was $81,000. Paid $6,100 in rent on the warehouse building for the month of March. Paid $7,100 to an insurance company for fire and liability insurance for a one-year period beginning April 1, 2021. Paid $81,000 on account for the merchandise purchased in 3. Collected $66,000 from customers on account. Recorded depreciation expense of $2,100 for the month on the equipment. Post the above transactions to the below T-accounts. Assume that the opening balances in each of the accounts is zero. Prepare a trial balance from the ending account balances.

Answer 1

Answer:

        Cash                                      Common stock

debit         credit                            debit         credit

410,000                                                           410,000

                 15,500

                 6,100

                 7,100

                 81,000

66,000                

366,300

   Equipment                                  Notes payable

debit         credit                            debit         credit

51,000                                                              35,500

                 2,100

48,900

      Inventory                                Accounts payable

debit         credit                            debit         credit

100,000                                                           100,000

                81,000                         81,000                    

19,000                                                              19,000

Accounts receivable                      Sales revenue

debit         credit                            debit         credit

175,000                                                           175,000

                 66,000

109,000

        COGS                                     Rent expense

debit         credit                            debit         credit

81,000                                            6,100

Prepaid insurance                        Depreciation expense - equip.

debit         credit                            debit         credit

7,100                                              2,100

In order to prepare a balance sheet we must first prepare an income statement:

        Wainwright Corporation

             Income Statement

For the Month Ended March 31, 2021

Total sales revenue   $175,000

COGS                          ($81,000)

Gross profit                  $94,000

Operating exp.:

Rent expense               ($6,100)

Depreciation expense ($2,100)

Net income                  $85,800

      Wainwright Corporation

             Balance Sheet

For the Month Ended March 31, 2021

Assets:

Cash $366,300

Accounts receivable $109,000

Inventory $19,000

Prepaid insurance $7,100

Equipment $48,900

Total assets: $550,300

Liabilities and stockholders' equity:

Accounts payable $19,000

Notes payable $35,500

Common stock $410,000

Retained earnings $85,800

Total liabilities and stockholders' equity: $550,300