Question

Issued 30,000 shares of common stock in exchange for $300,000 in cash. Purchased equipment at a cost of $40,000. $10,000 cash was paid and a notes payable to the seller was signed for the balance owed. Purchased inventory on account at a cost of $90,000. The company uses the perpetual inventory system. Credit sales for the month totaled $120,000. The cost of the goods sold was $70,000. Paid $5,000 in rent on the warehouse building for the month of March. Paid $6,000 to an insurance company for fire and liability insurance for a one-year period beginning April 1, 2021. Paid $70,000 on account for the merchandise purchased in 3. Collected $55,000 from customers on account. Recorded depreciation expense of $1,000 for the month on the equipment. Post the above transactions to the below T-accounts.

Answer 1

T-accounts:

Cash

Accounts Titles Debit Credit

Common Stock $300,000

Equipment $10,000

Rent Expense 5,000

Prepaid Insurance 6,000

Accounts Payable 70,000

Accounts Receivable 55,000

Equipment

Accounts Titles Debit Credit

Cash $10,000

Notes Payable 30,000

Notes Payable

Accounts Titles Debit Credit

Equipment $30,000

Inventory

Accounts Titles Debit Credit

Accounts Payable $90,000

Cost of Goods Sold $70,000

Accounts Payable

Accounts Titles Debit Credit

Inventory $90,000

Cash $70,000

Accounts Receivable

Accounts Titles Debit Credit

Sales Revenue $120,000

Sales Revenue

Accounts Titles Debit Credit

Accounts Receivable $120,000

Cost of Goods Sold

Accounts Titles Debit Credit

Inventory $70,000

Rent Expense

Accounts Titles Debit Credit

Cash $5,000

Prepaid Insurance

Accounts Titles Debit Credit

Cash $6,000

Common Stock

Accounts Titles Debit Credit

Cash $300,000

Depreciation Expense

Accounts Titles Debit Credit

Acc Depreciation $1,000

Accumulated Depreciation - Equipment

Accounts Titles Debit Credit

Depreciation Expense $1,000

Step-by-step explanation:

T-account consists of the following. An account title to record the corresponding account where the double-entry transaction is completed. A debit side on the left to enter the dollar value of the transaction, if the concerned account receives the value. A credit side on the right, also, to enter the dollar value of the transaction, if the concerned account gives out the value.