Question

Sweet Dreams Chocolatiers Ltd. began operations on January 1, 2016. During its first year, the following transactions occurred:

1.Issued common shares for $200,000 cash.

2.Purchased $475,000 of inventory on account.

3.Sold inventory on account for $640,000. The original cost of the inventory that was sold was $380,000.

4.Collected $580,000 from customers on account.

5.Paid $430,000 to suppliers for the inventory previously purchased on account.

6.Bought a delivery vehicle for $36,000 cash.

7.Paid $26,000 for rent, including $2,000 related to the next year.

8.Incurred $20,000 of operating expenses, of which $18,000 was paid.

9.Recorded $2,000 of depreciation on the vehicle.

10.Declared and paid dividends of $6,000.

Required

a.  

Prepare journal entries to record each of the above transactions.

b.  

Create T accounts and post the journal entries to the T accounts.

c.  

Prepare a December 31, 2016, trial balance.

Answer 1

		Sweet Dreams Chocolatiers Ltd
a.		JOURNAL ENTRIES
				(Amount in $)
SL. NO	DATE	PARTICULARS	DEBIT	CREDIT
1		Cash A/c	200,000
		To Share Capital A/c		200,000
		(Being issue of shares for cash)
2		Purchase A/c	475,000
		To Creditors A/c		475,000
		(Purchase of inventory by credit)
3		Debtors A/c	640,000
		To Sales A/c		640,000
		(Sale of inventory by credit)
4		Cash A/c	580,000
		To Debtors A/c		580,000
		(Collected cash from customers)
5		Creditors A/c	430,000
		To Cash		430,000
		(Payment made to creditors)
6		Vehicle A/c	36,000
		To Cash		36,000
		(Cash purchase of a delivery vehicle)
7		Rent A/c	24,000
		Prepaid Rent A/c	2,000
		To Cash		26,000
		(Payment of Rent which includes $ 2000 relate to next year)
8		Operating Expenses A/c	20,000
		To Cash		18,000
		To Expense Payable		2,000
		(Incurred operating expenses of which $ 2000 is payable)
9		Depreciation A/c	2,000
		To Vehicle A/c		2,000
		(Being recording of current year depreciation)
10		Divident A/c	6,000
		To Cash		6,000
		(Declaration and payment of dividend for the year)
	b	LEDGER ACCOUNTS
						(AMOUNT IN $)
	CASH A/C
	DATE	PARTICULARS	AMOUNT (DR)	DATE	PARTICULARS	AMOUNT (CR)
		To Share Capital A/c	200,000		By Creditors A/c	430,000
		To Debtos A/c	580,000		By Vehicle A/c	36,000
					By Rent A/c	24,000
					By Prepaid Rent A/c	2,000
					By Operating Expenses	18,000
					By Divident	6,000
				31.12.2016	By Balance C/d	264,000
		TOTAL	780,000		TOTAL	780,000
	SHARE CAPITAL A/C
	DATE	PARTICULARS	AMOUNT (DR)	DATE	PARTICULARS	AMOUNT (CR)
					By Cash	200,000
	31.12.2016	To Balance C/d	200,000
		TOTAL	200,000		TOTAL	200,000
	PURCHASE A/C
	DATE	PARTICULARS	AMOUNT (DR)	DATE	PARTICULARS	AMOUNT (CR)
		To Creditors	475,000
				31.12.2016	By Balance C/d	475,000
		TOTAL	475,000		TOTAL	475,000
	CREDITORS A/C
	DATE	PARTICULARS	AMOUNT (DR)	DATE	PARTICULARS	AMOUNT (CR)
		To Cash A/c	430,000		By Purchase A/c	475,000
	31.12.2016	To Balance C/d	45,000
		TOTAL	475,000		TOTAL	475,000
	SALES A/C
	DATE	PARTICULARS	AMOUNT (DR)	DATE	PARTICULARS	AMOUNT (CR)
					By Debtors A/c	640,000
	31.12.2016	To Balance C/d	640,000
		TOTAL	640,000		TOTAL	640,000
	DEBTORS A/C
	DATE	PARTICULARS	AMOUNT (DR)	DATE	PARTICULARS	AMOUNT (CR)
		To Sales A/c	640,000		By Cash A/c	580,000
				31.12.2016	By Balance C/d	60,000
		TOTAL	640,000		TOTAL	640,000
	VEHICLE A/C
	DATE	PARTICULARS	AMOUNT (DR)	DATE	PARTICULARS	AMOUNT (CR)
		To Cash	36,000		By Depreciation	2,000
				31.12.2016	By Balance C/d	34,000
		TOTAL	36,000		TOTAL	36,000
	PREPAID RENT A/C
	DATE	PARTICULARS	AMOUNT (DR)	DATE	PARTICULARS	AMOUNT (CR)
		To Cash A/c	2,000
				31.12.2016	By Balance C/d	2,000
		TOTAL	2,000		TOTAL	2,000
	RENT A/C
	DATE	PARTICULARS	AMOUNT (DR)	DATE	PARTICULARS	AMOUNT (CR)
		To Cash A/c	24,000
				31.12.2016	By Balance C/d	24,000
		TOTAL	24,000		TOTAL	24,000
	OPERATING EXPENSES A/C
	DATE	PARTICULARS	AMOUNT (DR)	DATE	PARTICULARS	AMOUNT (CR)
		To Cash A/c	18,000
		To Expenses Payable A/c	2,000	31.12.2016	By Balance C/d	20,000
		TOTAL	20,000		TOTAL	20,000
	EXPENSE PAYABLE A/C
	DATE	PARTICULARS	AMOUNT (DR)	DATE	PARTICULARS	AMOUNT (CR)
					By Operating Expenses	2,000
	31.12.2016	To Balance C/d	2,000
		TOTAL	2,000		TOTAL	2,000
	DEPRECIATION A/C
	DATE	PARTICULARS	AMOUNT (DR)	DATE	PARTICULARS	AMOUNT (CR)
		To Vehicle A/c	2,000
				31.12.2016	By Balance C/d	2,000
		TOTAL	2,000		TOTAL	2,000
	DIVIDEND A/C
	DATE	PARTICULARS	AMOUNT (DR)	DATE	PARTICULARS	AMOUNT (CR)
		To Cash A/c	6,000
				31.12.2016	By Balance C/d	6,000
		TOTAL	6,000		TOTAL	6,000
	c.	TRIAL BALANCE AS ON 31ST DECEMBER' 2016
				(AMOUNT IN $)
		PARTICULARS	AMOUNT(DR)	AMOUNT(CR)
		CASH	264,000
		SHARE CAPITAL		200,000
		PURCHASE	475,000
		CREDITORS		45,000
		SALES		640,000
		DEBTORS	60,000
		VEHICLE	34,000
		PREPAID RENT	2,000
		RENT	24,000
		OPERATING EXPENSES	20,000
		EXPENSE PAYABLE		2,000
		DEPRECIATION	2,000
		DIVIDENT	6,000
		TOTAL	887,000	887,000