Question

The following transactions occurred during March 2016 for the Wainwright Corporation. The company owns and operates a wholesale warehouse.

1. Issued 44,000 shares of common stock in exchange for $440,000 in cash.
2. Purchased equipment at a cost of $68,000. $17,000 cash was paid and a note payable was signed for the balance owed.
3. Purchased inventory on account at a cost of $134,000. The company uses the perpetual inventory system.
4. Credit sales for the month totaled $190,000. The cost of the goods sold was $114,000.
5. Paid $6,000 in rent on the warehouse building for the month of March.
6. Paid $6,850 to an insurance company for fire and liability insurance for a one-year period beginning April 1, 2016.
7. Paid $114,000 on account for the merchandise purchased in 3.
8. Collected $85,500 from customers on account.
9. Recorded depreciation expense of $1,700 for the month on the equipment.

Prepare a journal entry

Answer 1

journal entries for Wainwright Corporation

Share issue

DR Cash $440,000

CR ShareCapital $440,000

Equipment Purchase

DR Equipment $68,000

CR Cash $17,000

CR Note Payable(current liability) $51,000

Inventory purchased

DR inventory $134,000

CR Trade payable $134,000

Sales on credit

DR Trade receivable $190,000

CR Sales $190,000

DR Cost of sales $114,000

CR Inventory $114,000

Warehouse rent

DR Rent $6,000

CR Cash $6,000

Insurance

DR Prepayment for insurance $6,850

CR Cash $6,850

Payment for merchandise

DR Trade payable $114,000

CR Cash $114,000

Receipt of cash from customers

DR Cash $85,500

CR Trade receivable $85,500

Depreciation

DR Depreciation expense $1,700

CR Accumulated depreciation $1,700

Step-by-step explanation:

I have prepared the journal entries step by step with each transaction in mind,please note the sales on credit will involves two postings,recording sale amount as well as posting the cost of goods sold,please pay particular attention to this.