Question

Question B [AR1: 8 Marks]

Sun Company started its operations on January 1, 2019. The following transactions took place during the first month of operations:

January 1: Sun invests $4,600,000 cash to start the business.

January 3: Purchased furniture for $496,000, paying $96,000 in cash and sign a note for the remaining balance.

January 7: Purchased office supplies for $20,000 on credit.

January 11: Paid $44,000 cash for January rent.

January 15: Paid $5,400 cash for office supplies purchased on January 7.

January 20: Services billed to customers amount to $96,000.

January 22: Received utility bills for $10,500 for the month of January.

January 25: Paid $47,400 cash as salaries for the month.

January 29: Received $66,000 cash from customers in payment for services billed on January 20.

January 31: Sun withdrew $15,600 from the business for personal use.

Required:

1- Prepare Journal entries to record the above transactions.                                

2- Post to the appropriate ledger accounts.                                                           

3- Prepare the trial balance on January 31 2019.                                                 

4. Prepare the financial statements of Sun Company on January 31 2019.          

Answer 1

Requirement – 1;

Date	Accounts Title & Explanation	Debit	Credit
Jan. 1	Cash	$4600000
	Capital		$4600000
	(For recording investment of capital)
Jan. 3	Furniture	$496000
	Cash		$96000
	Notes Payable		$400000
	(For recording purchase of furniture)
Jan. 7	Office Supplies	$20000
	Accounts Payable		$20000
	(For recording purchase of office supplies on account)
Jan. 11	Rent	$44000
	Cash		$44000
	(For recording payment of rent)
Jan. 15	Accounts Payable	$5400
	Cash		$5400
	(For recording payment of accounts payable for office supplies)
Jan. 20	Accounts Receivable	$96000
	Service Revenue		$96000
	(For recording service revenue)
Jan. 22	Utilities Expense	$10500
	Utilities Expense Payable		$10500
	(For recording utilities expenses)
Jan. 25	Salaries Expense	$47400
	Cash		$47400
	(For recording payment of salaries expense)
Jan. 29	Cash	$66000
	Accounts Receivable		$66000
	(For recording payment received from accounts receivable)
Jan. 31	Drawings	$15600
	Cash		$15600
	(For recording amount withdrawn)

Requirement – 2;

Cash Account
Date	Debit	Credit
Jan. 1	$4600000
Jan. 3		$96000
Jan. 11		$44000
Jan. 15		$5400
Jan. 25		$47400
Jan. 29	$66000
Jan. 31		$15600
Ending balance	$4457600

Capital Account
Date	Debit	Credit
Jan. 1		$4600000
Ending balance		$4600000

Furniture Account
Date	Debit	Credit
Jan. 3	$496000
Ending balance	$496000

Notes Payable Account
Date	Debit	Credit
Jan. 3		$400000
Ending balance		$400000

Office Supplies Account
Date	Debit	Credit
Jan. 7	$20000
Ending balance	$20000

Accounts Payable Account
Date	Debit	Credit
Jan. 7		$20000
Jan. 15	$5400
Ending balance		$14600

Accounts Receivable Account
Date	Debit	Credit
Jan. 20	$96000
Jan. 29		$66000
Ending balance	$30000

Service Revenue Account
Date	Debit	Credit
Jan. 20		$96000
Ending balance		$96000

Utilities Expense Account
Date	Debit	Credit
Jan. 22	$10500
Ending balance	$10500

Utilities Expense Payable Account
Date	Debit	Credit
Jan. 22		$10500
Ending balance		$10500

Rent Expense Account
Date	Debit	Credit
Jan. 11	$44000
Ending balance	$44000

Salaries Expense Account
Date	Debit	Credit
Jan. 25	$47400
Ending balance	$47400

Drawings Account
Date	Debit	Credit
Jan. 31	$15600
Ending balance	$15600

Requirement – 3;

Sun Company
Trial Balance
As on Jan. 31, 2019
Accounts Title	Debit	Credit
Cash	$4457600
Accounts Receivable	$30000
Capital		$4600000
Furniture	$496000
Notes payable		$400000
Office supplies	$20000
Accounts payable		$14600
Service revenue		$96000
Utilities expense	$10500
Utilities expense payable		$10500
Rent expense	$44000
Salaries expense	$47400
Drawings	$15600
Totals	$5121100	$5121100

Requirement – 4;

Sun Company
Income Statement
Service revenue		$96000
Less: Expenses
Utilities expense	$10500
Rent expense	$44000
Salaries expense	$47400	($101900)
Net loss		($5900)

Sun Company
Balance Sheet
As on Jan. 31, 2019
Assets;
Cash	$4457600
Accounts Receivable	$30000
Office supplies	$20000
Furniture	$496000
Total Assets		$5003600
Liabilities;
Utilities expense payable	$10500
Notes payable	$400000
Accounts payable	$14600
Total liabilities		$425100
Stockholders’ fund;
Capital	$4600000
Drawings	($15600)
Net loss	($5900)
Total stockholders’ fund		$4578500
Total liabilities and stockholders’ fund		$5003600