Question

0Milo Clothing experienced the following events during Year 1, its first year of operation:

Acquired $18,500 cash from the issue of common stock.

Purchased inventory for $5,700 cash.

Sold inventory costing $3,420 for $5,814 cash.

Paid $800 for advertising expense.

Required
a. Record the general journal entries for the preceding transactions. Record the general journal entries for the preceding transactions. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
b. Post each of the entries to T-accounts.(Post each of the entries to T-accounts)

c. Prepare a trial balance to prove the equality of debits and credits.(Prepare a trial balance to prove the equality of debits and credits.)

Answer 1

Solution a:

Journal Entries - Milo Clothing
Event	Particulars	Debit	Credit
1	Cash Dr	$18,500.00
	To Common stock		$18,500.00
	(To record issue of common stock)
2	Inventory Dr	$5,700.00
	To Cash		$5,700.00
	(To record purchase of inventory)
3a	Cash Dr	$5,814.00
	To Sales Revenue		$5,814.00
	(To record cash sales)
3b	Cost of goods sold Dr	$3,420.00
	To Inventory		$3,420.00
	(To record cost of goods sold)
4	Advertising Expense Dr	$800.00
	To Cash		$800.00
	(To record advertising expense)

Solution b:

Cash
Event	Particulars	Debit	Event	Particulars	Credit
1	Common stock	$18,500.00	2	Inventory	$5,700.00
3a	Sales revenue	$5,814.00	4	Advertising expense	$800.00
				Ending balance	$17,814.00
	Total	$24,314.00		Total	$24,314.00

Common Stock
Event	Particulars	Debit	Event	Particulars	Credit
	Ending balance	$18,500.00	1	Cash	$18,500.00
	Total	$18,500.00		Total	$18,500.00

Inventory
Event	Particulars	Debit	Event	Particulars	Credit
2	Cash	$5,700.00	3b	Cost of goods sold	$3,420.00
				Ending balance	$2,280.00
	Total	$5,700.00		Total	$5,700.00

Sales Revenue
Event	Particulars	Debit	Event	Particulars	Credit
	Ending balance	$5,814.00	3a	Cash	$5,814.00
	Total	$5,814.00		Total	$5,814.00

Cost of goods sold
Event	Particulars	Debit	Event	Particulars	Credit
3b	Inventory sold	$3,420.00		Ending balance	$3,420.00
	Total	$3,420.00		Total	$3,420.00

Advertising expense
Event	Particulars	Debit	Event	Particulars	Credit
4	Cash	$800.00		Ending balance	$800.00
	Total	$800.00		Total	$800.00

Solution c:

Trial Balance - Milo Clothing
Account title	Debit	Credit
Cash	$17,814.00
Inventory	$2,280.00
Common Stock		$18,500.00
Sales Revenue		$5,814.00
Cost of goods sold	$3,420.00
Advertising expense	$800.00
Total	$24,314.00	$24,314.00