Question

Kochi Service was formed on May 1,2020. The following transactions took place during the first month (amounts in thousands)

Transactions on May 1:

1. Rahul Shah invested ₤40,000 cash in the company in exchange for ordinary shares.
2. Hired two employees to work in the warehouse. They will each paid a salary of ₤3,050 per month.
3. Signed a 2-year rental agreement on a warehouse; paid ₤24,000 cash in advance for the first year
4. Purchase furniture and equipment costing ₤30,000. A cash payment of ₤10,000 was immediately; the remainder will be paid in 6 months.
5. Paid ₤1,800 cash for a one-year insurance policy on the furniture and equipment

Transactions during the remainder of the month:

6. Purchased basic office supplies for ₤420 cash.
7. Purchased more office supplies for ₤1,500 on account.
8. Total revenues earned were ₤20,000

- ₤8,000 cash and ₤12,000 on account

9. Paid ₤400 to suppliers for accounts payable due.
10. Received ₤3,000 from customers in payment of accounts receivable.
11. Received utility bills in the amount of ₤380, to be paid next month.
12. Paid the monthly salaries of the two employees, totaling ₤6,100

Instructions

1. Prepare journal entries to record each of the events listed. (Omit explanations.)
2. Post the journal entries to T-accounts.
3. Prepare a trial balance as of May 31, 2020

Answer 1

Solution:

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(a)Journal Entries

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(b)  journal entries to T-accounts

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(c) Trial balance as of May 31, 2020.

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Thank you,