Question

PRINCE Company has the following opening account balances in its general and subsidiary ledgers on March 1^st, 2020. The Company uses the periodic inventory system. All accounts have normal debit and credit balances.

                             General Ledger

Account Title	March 1st ,2020 Balance
Cash	50,625
Accounts Receivable	19,500
Notes receivable	58,500
Merchandise Inventory	30,000
Office Supplies	1,500
Prepaid Insurance	3,000
Equipment	9,675
Accumulated Depreciation-Equipment	2,250
Accounts Payable	52,500
Share Capital-Ordinary	105,000
Retained Earnings	13,050

Accounts Receivable	$
Apple Green	6,500
Fortune D.C.	8,500
Westly N. R.	4,500
	19,500
Accounts Payable	$
Brothers Inc.	23,800
DeeBeeDee	19,500
Heaven Trade	9,200
	52,500

The following transactions take place in the month of March 2020.

Jan 1           Purchased merchandise from Heaven Trade $3,500, FOB shipping point, 2/15, n/45.

   1           Paid 12-month fire insurance $7,200, covering year 2020.

   3           Received checks for $4,500 from Westly N.R. and paid $350 to Quick Delivery for the freight on merchandised purchased on January 1^st.

   5           Sent a credit memo of $200 to Fortune D.C. for the allowance granted on unsatisfied merchandise.

   8           Sold merchandise of $3,600 to Zooick, terms FOB destination, 1/8, n/15. The relevant delivery charge, $400, was paid.

   9           Sent a check of $4,900, after a 2% discount, to Heaven Trade. Also, paid DeeBeeDee in full.

   9           Received payment in full from Apple Green and Fortune D.C..

  12          Paid rent of $2,500 for January.

13          Sold merchandise on account to Apple Green $1,900 and Westly N. R. $900, terms 1/8, n/20.

15          Paid Heaven Trade for the Jan.1 purchase.

16          Purchased merchandise on account from DeeBeeDee $15,000, terms 5/5, n/30.

17          Paid $600 cash for office supplies.

18          Returned $1,000 of inferior quality merchandise to DeeBeeDee and receive credit.

20          Cash sales totaled $17,500.

22          Received payment from Apple Green and Zooick.

22          Paid Brothers Inc. $15,300, no discount taken. Also paid DeeBeeDee.

25         Paid salaries of $8,300.

26         Sold merchandise to SunWing, $16,800, terms 1/EOM, n/30.

31          Received from Zooick a down payment of $10,000 for merchandise specifically ordered to its request.

Other information available on January 31^st, 2020

1. A count showed supplies on hand was $1,200.
2. Out of the $3,000 prepaid insurance on January 1^st, $300 was expired.
3. Depreciation expense for the month totaled $225.
4. Ending inventory was $29,000, out of which $1,200 was found to be not sellable anymore. The management decided to recognize a loss separately.
5. Utility bill of $1,350 was received but not yet paid. A separate payable account is used.

Required:

1. Journalize the March transactions in the general journal, no need to provide explanations to the entries. Use additional accounts when necessary.

(30.5 marks)

2. Prepare the Income Statement for the month ended March 31^st, 2020, the Statement of Financial Position as of that date.

(19.5 marks)

Answer 1

Journal entries:
Date	Acc Titles	Debit $	Credit $
1-Mar-20	Inventory	3500
	AP- Heaven		3500
1-Mar	Prepaid Ins.	7200
	Cash		7200
3-Mar	Cash	4150
	freight outward	350
	AR - Westly		4500
5-Mar	Sales Allowance	200
	AR- Fortune		200
8-Mar	AR- Zooick	3600
	Sales revenue		3600
	freight outward	400
	Cash		400
9-Mar	AP-Heaven	5000		(4900/98%)
	Trade discount		100
	Cash		4900
9-Mar	Cash	14800
	AR-Apple		6500
	AR-Furtune		8300
12-Mar	Rent exp.	2500
	Cash		2500
13-Mar	AR-Apple	1900
	AR - Westly	900
	Sales revenue		2800
15-Mar	AP- Heaven	3500
	Trade discount		70
	Cash		3430
16-Mar	Inventory	15000
	AP-DeeBee		15000
17-Mar	Office Supplies	600
	Cash		600
18-Mar	AP-DeeBee	1000
	Purchase allowance		1000
20-Mar	Cash	17500
	Sales revenue		17500
22-Mar	Cash	5500
	AR-Apple		1900
	AR- Zooick		3600
22-Mar	AP-Brothers	15300
	AP-DeeBee	15000
	Cash		30300
25-Mar	Salaries expense	8300
	Cash		8300
26-Mar	AR-Sunwing	16800
	Sales revenue		16800
31-Mar	Cash	10000
	Unearned revenue		10000
Adjustment entries:
31-Mar	Supplies exp.	900
	Office supplies		900
31-Mar	Insurance exp.	900		300+600
	Prepaid Insur.		900
31-Mar	Dep. Exp.	225
	Acc. Dep.		225
31-Mar	Spoilage exp.	1200
	Inventory		1200
31-Mar	Utility exp.	1350
	Expenses payable		1350

Trail Balance:
Acc Titles	Debit $	Credit $
Cash	44945			50625-7200+4150-400-4900+14800-2500-3430-600+17500+5500-30300-8300+10000
AR	17700			19500-4500-200+3600-6500-8300+1900+900-1900-3600+16800
NR	58500			58500
M. Inventory	27800			30000+3500+15000-1200-19500
Off Supplies	1200			1500+600-900
Prep. Ins.	9300			3000+7200-900
Equip.	9675			9675
Acc Dep- Eq.		2475		2250+225
AP		31200		52500+3500-5000-3500+15000-1000-15300-15000
Unearned rev.		10000		10000
Exp. Payable		1350		1350
SC - ordinary		105000		105000
RE		13050		13050
Freight o/w	750			350+400
Sales allow	200			200
Sales revenue		40700		3600+2800+17500+16800
Trade discount gain		170		100+70
COGS	19500			19500
Rent exp.	2500			2500
Purch. Allow.		1000		1000
salaries exp.	8300			8300
supplies exp.	900			900
Insu exp.	900			900
dep exp.	225			225
spoilage exp.	1200			1200
Utility exp	1350			1350
Total	204945	204945

Income Statement:
Sales revenue	40700
Sales allow	-200
Purch. Allow.	1000
Trade discount gain	170
Total Revenue	41670
COGS	19500
Gross Profit	22170
Less:Expenses:
Rent exp.	2500
Freight o/w	750
salaries exp.	8300
supplies exp.	900
Insu exp.	900
dep exp.	225
spoilage exp.	1200
Utility exp	1350
Total Expense	16125
Net Income	6045
Balance Sheet
Assets:
Cash	44945
AR	17700
NR	58500
M. Inventory	27800
Off Supplies	1200
Prep. Ins.	9300
Equip.	9675
Acc Dep- Eq.	-2475
Total Assets	166645
Liabilities & SH Eq.:
AP	31200
Unearned rev.	10000
Exp. Payable	1350
SC - ordinary	105000
RE	19095
Total Liab. & SH. Eq.	166645