Question

The following transactions occurred during March 2021 for the Wainwright Corporation. The company owns and operates a wholesale warehouse.
a. Issued 60,000 shares of non-par common stock in exchange for $600,000 in cash.
b. Purchased equipment at a cost of $100,000. $25,000 cash was paid and a notes payable to the seller was signed for the balance owed.
c. Purchased inventory on account at a cost of $182,000. The company uses the perpetual inventory system.
d. Credit sales for the month totaled $270,000. The cost of the goods sold was $162,000.
e. Paid $8,000 in rent on the warehouse building for the month of March.
f. Paid $8,050 to an insurance company for fire and liability insurance for a one-year period beginning April 1, 2021.
g. Paid $162,000 on account for the merchandise purchased in 3.
h. Collected $121,500 from customers on account.
i. Recorded depreciation expense of $2,500 for the month on the equipment.

Required:
Prepare journal entries to record each of the transactions listed above.

Answer 1

The Journal Entries to record the transactions for Wainwright Corporation in the month of March 2021 are as follows:

Journal Entries:

a. Debit Cash $600,000

Credit Common Stock $600,000

To record issuance of 60,000 shares of non-par common stock for cash.

b. Debit Equipment $100,000

Credit Cash $25,000

Credit Notes Payable $75,000

To record the purchase of equipment.

c. Debit Inventory $182,000

Credit Accounts Payable $182,000

To record the purchase of inventory on account.

d. Debit Accounts Receivable $270,000

Credit Sales Revenue $270,000

To record the credit sales for the month.

d. Debit Cost of Goods Sold $162,000

Credit Inventory $162,000

To record the cost of goods sold.

e. Debit Rent Expense $8,000

Credit Cash $8,000

To record the payment of rent on the warehouse building.

f. Debit Prepaid Insurance $8,050

Credit Cash $8,050

To record the prepayment of insurance for one year, from April 1, 2021.

g. Debit Accounts Payable $162,000

Credit Cash $162,000

To record payment on account.

h. Debit Cash $121,500

Credit Accounts Receivable $121,500

To record receipt of cash on account.

i. Debit Depreciation Expense $2,500

Credit Accumulated Depreciation $2,500

To record depreciation expense for the month.

Data Analysis:

a. Cash $600,000 Common Stock $600,000

b. Equipment $100,000 Cash $25,000 Notes Payable $75,000

c. Inventory $182,000 Accounts Payable $182,000

d. Accounts Receivable $270,000 Sales Revenue $270,000

d. Cost of Goods Sold $162,000 Inventory $162,000

e. Rent Expense $8,000 Cash $8,000

f. Prepaid Insurance $8,050 Cash $8,050

g. Accounts Payable $162,000 Cash $162,000

h. Cash $121,500 Accounts Receivable $121,500

i. Depreciation Expense $2,500 Accumulated Depreciation $2,500

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