Question

On July 1, $12,000 rent on building is paid for the months of July, August, and September. Merchandize inventory $40,000 is purchased on account. The company uses perpetual inventory system. On July 1, $20,000 is borrowed from a local bank, and a note payable is signed. Credit sales for the month are $62,000, The cost of merchandize sold is $38,000. $2,000 is paid on account for office supplies. $55,000 is collected from customers on account. $10,000 is paid to employees for wages in July. A bill of $3,000 is received from utility company for the month of July. A customer paid $9,000 for merchandize to be delivered in August and September. The company paid $1,000 as dividend to its shareholders.

Answer 1

Journal entries

Date	General Journal	Debit	Credit
1-Jul	Prepaid Rent	$ 12,000.00
	Cash		$ 12,000.00
	(prepaid rent paid for 3 months)
1-Jul	Merchandise Inventory	$ 40,000.00
	Accounts payable		$ 40,000.00
	(inventory purchases)
1-Jul	cash	$ 20,000.00
	Notes payable		$ 20,000.00
	(Notes payable issued to a bank)
31-Jul	Accounts Receivable	$ 62,000.00
	Sales revenue		$ 62,000.00
	(to record sales revenue)
31-Jul	Cost of goods sold	$ 38,000.00
	Merchandise Inventory		$ 38,000.00
	(Cost of goods sold recorded)
31-Jul	Supplies	$     2,000.00
	Accounts payables		$     2,000.00
	(supplies purchased)
31-Jul	Cash	$ 55,000.00
	Accounts Receivable		$ 55,000.00
	(collected from customers)
31-Jul	Wages expense	$ 10,000.00
	cash		$ 10,000.00
	(Wages paid)
31-Jul	Utility expense	$     3,000.00
	Utilities payable		$     3,000.00
	(Utility bill recorded)
31-Jul	Cash	$     9,000.00
	Unearned revenue		$     9,000.00
	(advance from customer received)
31-Jul	Dividends	$     1,000.00
	Cash		$     1,000.00
	(Dividends paid)
Adjusting Entry for rent
31-Jul	Rent expense	$     4,000.00
	Prepaid Rent		$     4,000.00
	(One month's rent expired)