The following transactions occurred during March 2018 for the Wainwright Corpora

Question

The following transactions occurred during March 2018 for the Wainwright Corporation. The company owns and operates a wholesale warehouse 1. Issued 20,000 shares of common stock in exchange for $200,000 in cash. 2. Purchased equipment at a cost of $20,000. $5,000 cash was paid and a note payable was signed for the balance owed. 3. Purchased inventory on account at a cost of $62,000. The company uses the perpetual inventory system 4. Credit sales for the month totaled $70,000. The cost of the goods sold was $42,000 5. Paid $3,000 in rent on the warehouse building for the month of March. 6. Paid $5,200 to an insurance company for fire and liability insurance for a one-year period beginning April 1, 2018. 7. Paid $42,000 on account for the merchandise purchased in 3 8. Collected $31,500 from customers on account. 9. Recorded depreciation expense of $500 for the month on the equipment.

Explanation / Answer

Journal Entries (Amount in $)

S.No. Accounts titles and explanation Debit Credit 1) Cash 200,000 Common Stock 200,000 (To record the issue of shares of common stock) 2) Equipment 20,000 Cash 5,000 Notes Payable ($20,000-$5,000) 15,000 (To record the purchase of equipment) 3) Merchandise Inventory 62,000 Accounts Payable 62,000 (To record the purchase of inventory on account) 4) Accounts Receivable 70,000 Sales revenue 70,000 (To record the credit sales for the month) Cost of goods sold 42,000 Merchandise Inventory 42,000 (To record the cost of goods sold of credit sales) 5) Rent expense 3,000 Cash 3,000 (To record the rent paid for the month of march) 6) Prepaid insurance 5,200 Cash 5,200 (To record the prepaid insurance) 7) Accounts Payable 42,000 Cash 42,000 (To record the amount paid for accounts payable) 8) Cash 31,500 Accounts Receivable 31,500 (To record the receipt of cash from accounts receivable) 9) Depreciation expense 500 Accumulated depreciation-Equipment 500 (To record the depreciation expense)

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