Question

At the end of last month, Ajax Inc. had the following balances in its accounts:
Cash $ 5,000
Inventory $10,000
Equipment $ 3,000
Land $10,000
Owe Jones $10,000
Common Stock $10,000
Retained Earnings $ 8,000
Set up the initial Balance Sheet for this month, make the appropriate entries for this month using the Accounting Equation, and show the ending Balance Sheet for this month. The following should be included for this month:
a. Buy inventory from Jones on credit for $10,000
b. Sell goods for $4,000
c. Sell common stock for $1,000
d. Pay wages of $2,000
e. Pay tax of $1,000
f. Sell goods to Smith on credit for $15,000
g. Pay rent of $100
h. Pay Jones $2,000
i. Depreciate equipment $200
j. Inventory at the end of the month is worth $7,000

Answer 1

Initial Balance sheet of Ajax Inc. for this Month

Liabilities	Amount in $	Assets	Amount on $
Common Stock	10000	Land	10000
Retained Earnings	8000	Equipment	3000
Trade payables - Jones	10000	Inventory	10000
		Cash	5000
Total	28000	Total	28000

Accounting equations for the transactions during the period

Entry No.	Particulars	Debit ($)	Credit ($)
a	Inventory a/c	10000
	To Jones a/c		10000
	{being inventory bought on credit}
b	Cash a/c	4000

	To Sales a/c		4000
	{Being cash sales made}
c	Cash a/c	1000
	To Common stock a/c		1000
	{being common stock sold}
d.	Wages a/c	2000

	To Cash a/c		2000
	{being wages paid}
e	Taxes a/c	1000
	To Cash a/c		1000
	{being taxes paid}
f	Smith a/c	15000
	To Sales a/c		15000
	{being credit sales made}
g	Rent a/c	100
	To Cash a/c		100
	{being rent paid}
h	Jones a/c	2000
	To Cash a/c		2000
	{being cash pais to Jones}
i	Depreciation a/c	200
	To Equipment a/c		200
	{being depreciation charged}

Income and expenditure a/c for the month

Particulars	Amount in $	Particulars	Amount in $
Opening Stock	10000	Sales (15000+4000)	19000
Purchases	10000	Closing Stock	7000
Wages	2000
Taxes	1000
Rent	100
Depreciation	200
Net Profit (Balancing figure) (to be transfered to Retained earnings)	2700
Total	26000	Total	26000

Ending Blance sheet for the month

Liabilities	Amount in $	Assets	Amount in $
Common Stock (10000+1000)	11000	Land	10000
Retained earnings (8000+2700)	10700	Equipment (3000-200)	2800
Trade payables - Jones (10000+10000-2000)	18000	Inventory	7000
		Trade Receivables - Smith	15000
		Cash (5000-2000+4000+1000-3000-100)	4900
Total	39700	Total	39700