Question

Allan set up a trading business, buying and selling goods. The following transactions took place in the first month of its trading, July 2020.

1. Allan introduced $500,000 cash into the business bank account.
2. The business bought a motor vehicle with price of $60,000. The payment was by cheque.
3. The business bought some inventory for $30,000. The payment was by cheque.
4. The entire inventory purchased in transaction #3 was sold $65,000 in cash.
5. Additional inventory was purchased amounting to $100,000 on credit.
6. 50% of the inventory purchased in transaction #5 was sold for $80,000. All these sales were on credit.
7. A payment of $30,000 was made to a supplier for some of the purchases.
8. A payment of $40,000 was received from a customer for some of the sales on credit.
9. Allan draw $10,000 from the bank account for his personal use.
10. The business paid $2,000 for the motor vehicle maintenance using a cheque.
11. The business paid $15,000 by cheque for the premium of one-year insurance policy.
12. The business received a bank loan of $100,000, repayable in two years.
13. Depreciation for motor vehicles should be allocated 10% per annum on costs.

You are required:

1. Post all the transactions to ledger accounts (including the necessary adjustment entries).
2. Prepare a trial balance as at 31 July 2020.

3. Prepare a statement of comprehensive income for the month ended 31 July 2020 and a statement of financial position as at 31 July 2020. (Assume that Allan has closing inventory of $47,000).

Answer 1

Complete answer is provided with sequentially in images. Kindly ignore some over writings in trail balance.