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

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

Step-by-step 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