Question

Question 2. Recording Accounting Transactions, Posting to the Ledger and Trial Balance

Mafia Rat decides that she wishes to set up a new company selling Lead and Concrete Boots for fishing.

She decides to call the new company ‘Sinking Feeling Limited’.

Following are the business events that related to the company for the month of July 2024: 1) July

1: Mafia Rat withdrew $1,560,000 from her personal account and placed it into the newly opened account of Sinking Feeling Limited.

2) July 2: Sinking Feeling Limited purchased $1,400,000 of merchandise inventory on credit and another $800,000 paying cash.

3) July 5: Sinking Feeling Limited acquired a new store to sell the merchandise, and a shed to keep the goods. The store was valued at $700,000 and was paid for in cash. The shed is valued at $250,000 with $100,000 paid in cash and rest by a loan from Black Rat Bank.

4) July 7: Sinking Feeling Limited sold merchandise inventory worth $375,000 to a customer for $550,000. The customer paid $250,000 in cash and remainder on credit.

5) July 9: Sinking Feeling Limited paid the wages of the employees in cash. Wages totalled $26,000.

6) July 10: The company purchased a new Semi-Truck valued at $900,000. The company paid $300,000 in cash and rest by a loan from the bank

. 7) July 11: Sinking Feeling Limited sold merchandise inventory worth $165,000 to a customer for $325,000. The customer paid it all on credit.

8) July 14: The company signed an agreement to supply goods to Bald Head Limited to $500,000. The agreement begins in August with Bald Limited paying an initial payment for the goods and services. Total down-payment was of $85,000.

9) July 16: Mafia Rat withdrew $75,000 from the business to pay for her mother to get swimming lessons at a private clinic in the Atlantic Ocean.

10) July 18: The company paid $125,000 in advance for future fuel supplies for the company’s semi-truck for it to be used in delivering goods. All the fuel will be used by end of the month.

11) July 21: The company took out a new loan from the bank to help meet working capital expenditure. The loan was for $160,000.

12) July 23: The customer that purchased merchandise on credit on July 11 paid half of outstanding balance with cash.

13) July 24: Mafia Rat advanced a loan of $120,000 in cash to the company. The loan was interest free and could be repaid at any time.

14) July 26: Sinking Feeling Limited paid the wages of the employees. Wages totalled $26,000. Half was paid in cash and the rest will be paid in 2 weeks.

15) July 30: Sinking Feeling Limited received the water bill from the water company for the amount of $20,000 paying $8,000 immediately in cash and rest to be paid next month. 16) July 31: Sinking Feeling Limited owed employees another $3,000 in unpaid wages at the end of the month. The company will pay the outstanding balance in 10 days.

Required:

1. Record the journal entries for the month of July 2024.
2. Post to the ledger accounts (i.e., T-accounts).   

c. Prepare a trial balance as at the end of July 2024.

  In completing your answer, only use the accounts listed on the next page. If you feel that an account is missing, then you may wish to create a new one then you must fully justify. Accounts created without justification will be ignored. Using accounts not from the list or adding without justification will be marked as incorrect.

List of Accounts to be Used Question 2

Account Name	Account No.
Cash	1000
Accounts Receivable	1100
Prepaid Expenses	1200
Merchandise Inventory	1300
Property, Plant and Equipment – Store	2100
Property, Plant and Equipment – Shed	2200
Property, Plant and Equipment – Semi-Truck	2300
Accounts Payable	3000
Unearned Revenue	3200
Loans	4000
Shareholder’s Advances	4100
Owners’ Share Capital	5000
Sales Revenue	6000
Cost of Goods Sold	7000
Salary and Wages Expense	7100
Electricity Expense	7200
Miscellaneous Expense	7300

Answer 1

a. Journal Entries

Date		Debit	Credit
1-Jul-2024	Cash	1,560,000
	Owner's Share Capital		1,560,000
2-Jul-2024	Merchandise inventory	1,400,000
	Accounts payable		1,400,000
	Merchandise inventory	800,000
	Cash		800,000
5-Jul-2024	Property, Plant and Equipment - Store	700,000
	Cash		700,000
	Property, Plant and Equipment - Shed	250,000
	Cash		100,000
	Loans		150,000
7-Jul-2024	Cash	250,000
	Accounts Receivable	300,000
	Sales Revenue		550,000
	Cost of Goods Sold	375,000
	Merchandise inventory		375,000
9-Jul-2024	Salary and Wages Expense	26,000
	Cash		26,000
10-Jul-2024	Property, Plant and Equipment - Semi-Truck	900,000
	Cash		300,000
	Loans		600,000
11-Jul-2024	Accounts Receivable	325,000
	Sales Revenue		325,000
	Cost of Goods Sold	165,000
	Merchandise inventory		165,000
14-Jul-2024	Cash	85,000
	Unearned Revenue		85,000
16-Jul-2024	Shareholders's Advances	75,000
	Cash		75,000
18-Jul-2024	Prepaid Expenses	125,000
	Cash		125,000
21-Jul-2024	Cash	160,000
	Loans		160,000
23-Jul-2024	Cash	162,500
	Accounts Receivable		162,500
24-Jul-2024	Cash	120,000
	Loans		120,000
26-Jul-2024	Salary and Wages Expense	26,000
	Cash		13,000
	Accounts payable		13,000
30-Jul-2024	Miscellaneous Expense	20,000
	Cash		8,000
	Accounts payable		12,000
31-Jul-2024	Salary and Wages Expense	3,000
	Accounts payable		3,000

b. Ledger

Cash
1-Jul-24	Owner's Share Capital	1,560,000	2-Jul-24	Merchandise Inventory	800,000
7-Jul-24	Sales Revenue	250,000	5-Jul-24	Property, Plant and Equipment - Store	700,000
14-Jul-24	Unearned Revenue	85,000	5-Jul-24	Property, Plant and Equipment - Shed	100,000
21-Jul-24	Loans	160,000	9-Jul-24	Salary and Wages	26,000
23-Jul-24	Accounts Receivable	162,500	10-Jul-24	Property, Plant and Equipment - Truck	300,000
24-Jul-24	Loans	120,000	16-Jul-24	Shareholder's Advances	75,000
			18-Jul-24	Prepaid Expenses	125,000
			26-Jul-24	Salary and Wages	13,000
			30-Jul-24	Miscellaneous Expense	8,000
			31-Jul-24	Balance	190,500
		2,337,500			2,337,500
Prepaid Expenses
18-Jul-24	Cash	125,000	31-Jul-24	Balance	125,000
		125,000			125,000
Property, Plant and Equipment - Store
5-Jul-24	Cash	700,000	31-Jul-24	Balance	700,000
		700,000			700,000
Property, Plant and Equipment - Semi-Truck
10-Jul-24	Cash	300,000	31-Jul-24	Balance	900,000
	Loans	600,000
		900,000			900,000
Unearned Revenue
31-Jul-24	Balance	85,000	14-Jul-24	Cash	85,000
		85,000			85,000
Shareholders's Advances
16-Jul-24	Cash	75,000	31-Jul-24	Balance	75,000
		75,000			75,000
Sales Revenue
31-Jul-24	Balance	875,000	7-Jul-24	Cash	250,000
				Account Receivable	300,000
			11-Jul-24	Account Receivable	325,000
		875,000			875,000
Salary and Wages Expense
9-Jul-24	Cash	26,000	31-Jul-24	Balance	55,000
26-Jul-24	Cash	13,000
	Accounts Payable	13,000
31-Jul-24	Accounts Payable	3,000
		55,000			55,000
Accounts Receivable
7-Jul-24	Sales Revenue	300,000	23-Jul-24	Cash	162,500
11-Jul-24	Sales Revenue	325,000	31-Jul-24	Balance	462,500
		625,000			625,000
Merchandise Inventory
2-Jul-24	Accounts Payable	1,400,000	7-Jul-24	Cost of Goods Sold	375,000
2-Jul-24	Cash	800,000	11-Jul-24	Cost of Goods Sold	165,000
			31-Jul-24	Balance	1,660,000
		2,200,000			2,200,000
Property, Plant and Equipment - Shed
5-Jul-24	Cash	250,000	31-Jul-24	Balance	250,000
		250,000			250,000
Accounts Payable
31-Jul-24	Balance	1,428,000	2-Jul-24	Merchandise Inventory	1,400,000
			26-Jul-24	Salary and Wages	13,000
			30-Jul-24	Miscellaneous Expense	12,000
			31-Jul-24	Salary and Wages	3,000
		1,428,000			1,428,000
Loans
31-Jul-24	Balance	1,030,000	5-Jul-24	Property, Plant and Equipment - Shed	150,000
			10-Jul-24	Property, Plant and Equipment - Truck	600,000
	18-Jul-24	Cash	160,000
			24-Jul-24	Cash	120,000
		1,030,000			1,030,000
Owner's Share Capital
31-Jul-24	Balance	1,560,000	1-Jul-24	Cash	1,560,000
		1,560,000			1,560,000
Cost of Goods Sold
7-Jul-24	Merchandise inventory	375,000	31-Jul-24	Balance	540,000
11-Jul-24	Merchandise inventory	165,000
		540,000			540,000
Miscellaneous Expense
30-Jul-24	Cash	8,000	31-Jul-24	Balance	20,000
	Accounts Payable	12,000
		20,000			20,000

c.Trial Balance

Particulars	Debit	Credit
Cash	190,500
Accounts Receivable	462,500
Prepaid Expenses	125,000
Merchandise inventory	1,660,000
Property, Plant and Equipment - Store	700,000
Property, Plant and Equipment - Shed	250,000
Property, Plant and Equipment - Semi-Truck	900,000
Accounts payable		1,428,000
Unearned Revenue		85,000
Loans		1,030,000
Shareholders's Advances	75,000
Owner's Share Capital		1,560,000
Sales Revenue		875,000
Cost of Goods Sold	540,000
Salary and Wages Expense	55,000
Miscellaneous Expense	20,000
	4,978,000	4,978,000