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 $50,000. $15,000 cash was paid and a note payable was signed for the balance owed. 3. Purchased inventory on account at a cost of $98,000. The company uses the perpetual inventory system. 4. Credit sales for the month totaled $170,000. The cost of the goods sold was $80,000. 5. Paid $6,000 in rent on the warehouse building for the month of March. 6. Paid $7,000 to an insurance company for fire and liability insurance for a one-year period beginning April 1, 2018. 7. Paid $80,000 on account for the merchandise purchased in 3. 8. Collected $65,000 from customers on account. 9. Recorded depreciation expense of $2,000 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:

Wainwright Corporation

1. T-accounts:

Cash

Account Titles              Debit       Credit

Common stock       $400,000

Equipment                               $15,000

Rent expense                             6,000

Prepaid Insurance                      7,000

Accounts Payable                    80,000

Accounts Receivable 65,000

Balance                               $357,000

Accounts Receivable

Account Titles              Debit       Credit

Sales Revenue       $170,000

Cash                                         $65,000

Balance                                     105,000

Inventory

Account Titles              Debit       Credit

Accounts Payable  $98,000

Cost of goods sold                  $80,000

Balance                                       18,000

Prepaid Insurance

Account Titles              Debit       Credit

Cash                         $7,000

Equipment

Account Titles              Debit       Credit

Cash                          $15,000

Notes Payable            35,000

Balance                                      $50,000

Accumulated Depreciation

Account Titles              Debit       Credit

Depreciation expense               $2,000

Common stock

Account Titles              Debit       Credit

Cash                                       $400,000

Notes Payable

Account Titles              Debit       Credit

Equipment                               $35,000

Accounts Payable

Account Titles              Debit       Credit

Inventory                                  $98,000

Cash                        $80,000

Balance                      18,000

Sales Revenue

Account Titles              Debit       Credit

Accounts Receivable            $170,000

Cost of goods sold

Account Titles              Debit       Credit

Inventory                 $80,000

Rent Expense

Account Titles              Debit       Credit

Cash                          $6,000

Depreciation Expense

Account Titles              Debit       Credit

Acc. depreciation    $2,000

2. Trial Balance as at March 31, 2018

Account Titles                Debit         Credit

Cash                          $357,000

Accounts receivable   105,000

Inventory                       18,000

Prepaid Insurance          7,000

Equipment                   50,000

Accumulated depreciation            $2,000

Common stock                            400,000

Notes payable                               35,000

Accounts payable                          18,000

Sales revenue                             170,000

Cost of goods sold     80,000

Rent Expense               6,000

Depreciation expense 2,000

Total                      $625,000 $625,000

Explanation:

a) Data and Analysis for the month of March 2018:

1. Cash $400,000 Common stock $400,000

2. Equipment $50,000 Cash $15,000 Notes Payable $35,000

3. Inventory $98,000 Accounts Payable $98,000

4. Accounts Receivable $170,000 Sales Revenue $170,000

4. Cost of goods sold $80,000 Inventory $80,000

5. Rent expense $6,000 Cash $6,000

6. Prepaid Insurance $7,000 Cash $7,000

7. Accounts Payable $80,000 Cash $80,000

8. Cash $65,000 Accounts Receivable $65,000

9. Depreciation expense $2,000 Accumulated Depreciation $2,000