Question

The following information is available about the entity’s business transactions in May 2019.

May	1	Borrowed $300,000 from a bank.
	2	Purchased inventory on credit from a supplier A/K, n/20, $5,000.
	4	Paid insurance for the next 12 months $6,000.
	8	Paid the supplier A/K the full amount for inventory purchased on 2 May.
	9	Owner withdrew $2,000 for personal use.

Required:

Prepare general journal entries to record the transactions. Ignore GST.

Answer 1

Journal Entries:

Date	Account title and explanation	Debit	Credit
May 1	Cash	$300,000
	Notes payable		$300,000
	[To record cash borrowed from bank]
May 2	Invetory	$5,000
	Accounts payable		$5,000
	[To record purchase of inventory on account]
May 4	Prepaid insurance	$6,000
	Cash		$6,000
	[To record payment of insurance]
May 8	Accounts payable	$5,000
	Cash		$5,000
	[To record cash paid to supplier]
May 9	Owner's drawings	$2,000
	Cash		$2,000
	[To record owner's withdrawals]