Question

XOS Corporation (XOS) sells accounting-related memorabilia at a small store. The company was organized and began operations on January 1, 2016.

Events During January, 2016:

1. On January 1, the owner invested $100,000 cash in the company, receiving 1,000 shares of $2 par value common stock in exchange.

2. On January 1, XOS purchased furniture and fixtures for $30,000.  Paid $5,000 cash down, and signed a promissory note with a 12% annual rate of interest for the balance of the purchase price. Note plus interest to be paid in 2 years.

3. On January 1, XOS paid two months rent in advance to mall owners for floor space, $6,000.

4. On January 1, XOS paid a one-year premium for liability and casualty insurance, $1,200.

5. During January, the company purchased merchandise inventory on account for $25,000.

6. During January, sales totaled $48,000 ($28,000 for cash and $20,000 on credit). The cost of the merchandise sold was $20,000.  XOS uses a perpetual inventory system.

7. During January, the company paid wages totaling $3,000.

8. During January, payments on account to suppliers of inventory totaled $9,000.

9. During January, a customer ordered 100 custom-made t-shirts saying “SOX ROX!”-for delivery in February, 2016.  XOS required payment in advance ($1,000) for the entire order.

10.  During January, customers paid $10,000 to XOS for sales made on credit

Additional Information:

The furniture and fixtures have an expected useful life of 5 years and zero expected salvage value.   XOS uses the straight-line method of depreciation.

At January 31, employees have earned wages of $1,000 that will not be paid until February.

Utilities charges for January are estimated to be $600. However, the utilities bill will not be received and paid until mid-February.

Requirements

*1. Prepare journal entries to record the ten transactions that occurred during January, and, using the attached page, post related amounts to XOS’s general ledger (T-Accounts). Then prepare an unadjusted trial balance at January 31.

*2. Prepare any necessary adjusting journal entries at January 31, and post related amounts to the T-Accounts. Then prepare an adjusted trial balance at January 31.

(Hint:  There are 6 AJE’s)

Answer 1

	Journal Entry
1	Cash 100,000    Share Capital 100,000
2	Furniture & Fixture 30,000 TO Cash 5,000 To 12% Notes Payable 25,000
3	Advance Rent 6,000 Cash 6,000
4	Insurance 1,200 Cash 1,200
5	Purchases 25,000 Accounts Payable 25,000
6	Cash 28,000 Accounts Receivable 20,000    Sales 48,000
7	Wages 3,000 Cash 3,000
8	Accounts Payable 9,000 Cash 9,000
9	Cash 1,000 Advance Payment 1,000
10	Cash 10,000 Accounts Receivable 10,000
	AJE
11	Depreciation 6,000 To Furniture & Fixtures 6,000
12	Wages 1,000 Outstanding Wages 1,000
13	Utilities 600 O/S Utilities 600
14	Rent 3,000 Advance Rent 3000
15	Accrued Interest on 12% Notes Payable    250 12% Notes Payable 250
16	Closing Stock 5,000 Purchases 5,000 Ledger Ledger Accounts Cash A/c ToShare Capital                     1,00,000.00 By Furniture & Fixtur           5,000.00 Wages To sales                       28,000.00 By Advance Rent           6,000.00 To Cash           3,000.00 BY bal c/f       3,000.00 To Accounts Receivable                       10,000.00 By Insurance           1,200.00 To Advance payment                         1,000.00 By Wages           3,000.00 By Accounts Payable           9,000.00 BY bal c/f     1,14,800.00 Insurance To Cash           1,200.00 BY bal c/f       1,200.00 Furniture & Fixture TO Cash                           5,000.00 To 12% Notes Payable                       25,000.00 BY bal c/f         30,000.00 . Advance Rent Sales Advance payment To Cash                         6,000.00 By Cash     28,000.00 To bal c/f                     1,000.00 By Cash           1,000.00 BY bal c/f           6,000.00 By Accounts Receivable     20,000.00 To bal c/f         48,000.00 12% Notes Payable Accounts Payable   Accounts Receivable By Furniture & Fixtur         25,000.00 To Cash                         9,000.00 By Purchases         25,000.00 To bal c/f                   25,000.00 To Sales         20,000.00 by Cash     10,000.00 BY bal c/f     10,000.00 To bal c/f                       16,000.00 Share Capital To Cash     1,00,000.00 To bal c/f               1,00,000.00 Ledger After AJE Ledger Accounts Cash A/c Accrued Interest on 12% Notes Payable ToShare Capital                     1,00,000.00 By Furniture & Fixtur           5,000.00 Wages To 12% Notes Payable                         250.00 BY bal c/f               250.00 To sales                       28,000.00 By Advance Rent           6,000.00 To Cash           3,000.00 BY bal c/f       4,000.00 To Accounts Receivable                       10,000.00 By Insurance           1,200.00 To Outstanding Wages           1,000.00 To Advance payment                         1,000.00 By Wages           3,000.00 By Accounts Payable           9,000.00 BY bal c/f     1,14,800.00 Utilities To Outstanding Utilities                         600.00 BY bal c/f               600.00 Insurance To Cash           1,200.00 BY bal c/f       1,200.00 Furniture & Fixture TO Cash                           5,000.00 By Depreciation           5,000.00 To 12% Notes Payable                       25,000.00 BY bal c/f         25,000.00 . Advance Rent Sales Advance payment To Cash                         6,000.00 By Rent           3,000.00 By Cash     28,000.00 To bal c/f                     1,000.00 By Cash           1,000.00 BY bal c/f           3,000.00 By Accounts Receivable     20,000.00 To bal c/f         48,000.00 12% Notes Payable Accounts Payable   Accounts Receivable By Furniture & Fixtur         25,000.00 To Cash                         9,000.00 By Purchases         25,000.00 To bal c/f                   25,000.00 To Sales         20,000.00 by Cash     10,000.00 BY bal c/f     10,000.00 To bal c/f                       16,000.00 Share Capital To Cash     1,00,000.00 Purchases To bal c/f               1,00,000.00 To bal c/f                         5,000.00 By Closing Stock           5,000.00 Trial Balance Debit Credit Cash A/c 1,14,800.00 Furniture & Fixture      30,000.00 Advance Rent        6,000.00 Accounts Payable        16,000.00 Wages        3,000.00 Sales      48,000.00 Accounts Receivable      10,000.00 Advance payment        1,000.00 12% Notes Payable      25,000.00 Share Capital 1,00,000.00 Insurance        1,200.00 Purchases      25,000.00 Total 1,90,000.00 1,90,000.00

Adjusted Trial Balance

	Debit	Credit
Cash A/c	1,14,800.00
Furniture & Fixture	25,000.00
Depreciation	5,000.00
Advance Rent	3,000.00
Rent	3,000.00
Accounts Payable		16,000.00
Wages	4,000.00
Sales		48,000.00
Accounts Receivable	10,000.00
Advance payment		1,000.00
12% Notes Payable		25,250.00
Share Capital		1,00,000.00
Insurance	1,200.00
Purchases	20,000.00
Accrued Interest on 12% Notes Payable	250.00
Outstanding Wages		1,000.00
Closing Stock	5,000.00
Total	1,91,250.00	1,91,250.00	-