Question

Section C: Long Question [SK2:15 marks 1 x 15 marks] C1 Transactions of Star Company for the month of January 2019 are presented below: 1. On January 1, 2019, the owner invested $75,000 cash in the business. 2. Purchased equipment for $35,000 cash. 3. Purchased supplies on account for $8,000. 4. Received a bill for $1,250 for advertising of the current month. 5. Provided $17,500 of programming services for customers. Star company received cash of $7,500 from customers, and billed the customers with the remaining amount. 6. Paid the following January expenses in cash: salaries $4,500, rent $3,000, and utilities $1,000. 7. Paid its $1,250 advertising bill in cash. 8. The owner withdrew $6,500 in cash from the business for his personal use. Required: 1- Prepare journal entries to record the above transactions. (5 marks) 2- Post to the appropriate ledger accounts. (5 marks) 3- Prepare the trial balance of Star Company on January 31, 2019. (5 marks)

Answer 1

1) Journal Entries

				Debit	Credit
1	Cash A/c		Dr.	75,000
		To Capital A/c			75,000
	(Being Cash invested in business)
2	Equipment A/c		Dr.	35,000
		To Cash A/c			35,000
	(Being Equipment purchased for Cash)
3	Purchases A/c		Dr.	8,000
		To Creditors			8,000
	(Being supplies purchased on account)
4	Advertisement A/c		Dr.	1,250
		To Creditors			1,250
	(Being Advertisement expenses incurred for the month)
5	Cash A/c		Dr.	7,500
	Debtors A/c		Dr.	10,000
		To Sales A/c			17,500
	(Being services provided to customers for cash and on account)
6	Salaries A/c		Dr.	4,500
	Rent A/c		Dr.	3,000
	Utilities A/c		Dr.	1,000
		To Cash A/c			8,500
	Being expenses paid in cash)
7	Creditors A/c		Dr.	1,250
		To CashA/c			1,250
	(Being cash paid to creditors for advertisement expenses)
8	Drawings A/c		Dr.	6,500
		To Cash A/c			6,500
	(Being cash withdrawn for personal use by owner)

2) Ledgers

Cash A/c
Particulars	Amount	Particulars	Amount
To Capital	75,000	By Equipment	35,000
To Sales	7,500	By Salaries	4,500
		By Rent	3,000
		By Utilities	1,000
		By Creditors	1,250
		By Drawings	6,500
		By Balance c/d	31,250
	82,500		82,500
Capital A/c
Particulars	Amount	Particulars	Amount
To Cash (Drawings)	6,500	By Cash	75,000
To Balance c/d	68,500
	75,000		75,000
Equipment A/c
Particulars	Amount	Particulars	Amount
To Cash	35,000
		By Balance c/d	75,000
	75,000		75,000
Purchases A/c
Particulars	Amount	Particulars	Amount
To Creditors	8,000
		By Balance c/d	8,000
	8,000		8,000
Creditors A/c
Particulars	Amount	Particulars	Amount
To Cash	1,250	By Purchases	8,000
		By Advertisement	1,250
To Balance c/d	8,000
	9,250		9,250
Advertisement
Particulars	Amount	Particulars	Amount
To creditors	1,250
		By Balance c/d	1,250
	1,250		1,250
Debtors
Particulars	Amount	Particulars	Amount
To Sales	10,000
		By Balance c/d	10,000
	10,000		10,000
Sales
Particulars	Amount	Particulars	Amount
		By Debtors	10,000
		By Cash	7,500
To Balance c/d	17,500
	17,500		17,500
Salaries
Particulars	Amount	Particulars	Amount
To Cash	4,500
		By Balance c/d	4,500
	4,500		4,500
Rent
Particulars	Amount	Particulars	Amount
To Cash	3,000
		By Balance c/d	3,000
	3,000		3,000
Utilities
Particulars	Amount	Particulars	Amount
To Cash	1,000
		By Balance c/d	1,000
	1,000		1,000

Trial Balance

Trial Balance
Particulars	Debit	Credit
Cash	31250
Capital		68,500
Equipment	35000
Purchases	8000
Creditors		8,000
Advertisement	1250
Debtors	10000
Sales		17,500
Salaries	4500
Rent	3000
Utilities	1000
	94000	94000