Question

Below is set of transactions for company, Orange Electronics Warehouse (“OEW”), from January 1, 2018 through December 31, 2018.

Prepare the journal entries for each transaction shown, Also, please prepare any adjusting entries which may be required such as depreciation, amortization of prepaid expenses, etc., they can be done once at the end of the year

The following transactions took place during the year ended December 31, 2018:

(1) January 2 New investors contributed $225,000 cash to help in launching OEW in exchange for 75,000 shares of stock.

(2) January 31 OEW rented a building for $2,500 per month on a seven-year rental contract. A security deposit and last month’s rent was paid upon signing of the contract. Rent is due on the 1st of every month beginning on February 1.

(3) February 1 OEW obtained a $70,000 cash loan from Easy Bank. The note has a 6% annual interest rate and requires monthly interest-only payments (0.5% per month) on the first day of every month beginning on March 1, 2018. The loan is due to be paid in full in three years.

(4) February 15 OEW hired two employees who will each earn $500 bi-weekly. Employees will be paid monthly on the first day of each month.

(5) March 1 Made its first monthly interest payment to Easy Bank for the $70,000 loan it obtained in transaction (3) – Don’t forget the rest of the year!

(6) March 15 OEW hires 2 additional workers each earning $150 per week. Employees will be paid monthly on the first day of each month.

(7) March 15 OEW purchased a general insurance plan that will cover the company for two years from April 1, 2018 through March 30, 2020. The policy cost $3,600 for the entire policy period. OEW paid for the policy in cash.

(8) March 28 OEW purchased inventory consisting of laptops, cellphones, scanners, cables, mice video games, computer accessories, etc. totaling $95,000 from various manufacturers on account.

(9) May 30 OEW purchased shelving, racks, a forklift, a delivery truck, and other equipment on account for $50,400. This equipment is expected to be usable for 7 years.

(10) June 1 Sold 80 of laptops in inventory to Budget Computers on account. These computers were sold for $500 each, and they cost $225 each.

(11) June 15 Sent a check totaling $25,000 to a vendor as partial payment for the inventory purchased in transaction (8)

(12) July 7 Sold 120 computer scanners to MicroWarehouse for $65 each on account. OEW had previously purchased these items for $22 each. OEW also sold 466 HDMI cables to Fried Electronics for $10 each in cash. They cost OEW $4.50 each.

(13) August 1 OEW paid $4,800 cash for radio advertisements to run through the next six months from August 1, 2018 through January 30, 2019.

(14) August 28 Collected half the amount outstanding from Budget Computers on the sale made in transaction (10).

(15) September 8 Paid a $4,000 dividend to shareholders.

(16) October 3 Paid the remainder of the amount due for the inventory purchased in transaction (8), and paid for the equipment purchased in transaction (9).

(17) October 7 One of the employees hired in transaction (4) quits to take a job at Amazon. The employee is paid for their services provided this month.

(18) October 31 Billed Wally’s Mart for $57,000 of computer parts sold and shipped to them today. The cost of these items to OEW was $32,650. (

19) November 3 OEW signed a contract with a computer parts retailer to provide 100 3-button mice on the 15th of every month for 6 months beginning on November 15th. OEW collected the total sales price for all six months’ worth of mice when the contract was signed, for a total of $14,400. The mice cost $8.50 each.

(20) November 15 Collected $10,000 from Budget Computers on the sale made in transaction (10).

(21) December 15 Received a bill for accounting services for $2,500. This bill will be paid on January 15, 2019.

(22) December 30 Paid January 2019’s rent payment two days early.

(23) December 31 Sold the delivery truck purchased in transaction (9) at a loss of $6,100. The truck had cost $25,200 and OEW received $17,000 of cash.

(24) December 31 OEW issued stock to retire $25,000 of the bank loan from Easy Bank in Transaction (3).

(25) December 31 OEW exchanged $300,000 of stock for the building it was renting. In addition, the amounts paid on January 31st as well as the January 2019 rent payment paid early on December 30th was agreed to by the parties to instead be used towards the purchase of the building and the remainder of the rental agreement canceled.

Answer 1

Journal Entries

Debit ($) 2,25,000 2,500 70,000 2,500 Date General Journal 02-Jan Cash 02-Jan Common Stock 31-Jan Rent Expense 31-Jan Cash 01-Feb Cash 01-Feb Bank Loan 01-Feb Rent Expense 01-Feb Cash 15-Feb No entry 15-Feb No entry 01-Mar Interest Expense 01-Mar Cash 01-Mar Salaries and Wages 01-Mar Cash 01-Mar Rent Expense 01-Mar Cash 15-MarNo entry 15-Mar No entry 15-Mar Prepaid Insurance 15-Mar Cash 28-Mar Inventory 28-Mar Accounts Payable 350 Credit ($) Narration Being shares issued for cash 2,25,000 Being shares issued for cash Last month's Rent i.e. January paid 2,500 Last month's Rent i.e. January paid Cash Loan taken from Bank 70,000 Cash Loan taken from Bank Rent for the month of Feb Paid 2,500 Rent for the month of Feb Paid Hiring of Employees - Hiring of Employees Interest payment on Loan for Feb 350 Interest payment on Loan for Feb Salaries for the month of Feb Two weeks 1,000 Salaries for the month of Feb Two weeks Rent for the month of March Paid 2,500 Rent for the month of March Paid Hiring of Employees Hiring of Employees Insurance policy from 1 April 18 to 31 Mar 20 3,600 Insurance policy from 1 April 18 to 31 Mar 20 Inventory purchased 95,000 Inventory purchased 1,000 2,500 - 3,600 95,000

350 2,600 2,500 350 3,200 2,500 01-Apr linterest Expense 01-Apr Cash 01-Apr Salaries and Wages 01-Apr Cash 01-Apr Rent Expense 01-Apr Cash 01-May Interest Expense 01-May Cash 01-May Salaries and Wages 01-May Cash 01-May Rent Expense 01-May Cash 30-May Equipments 30-May Accounts Payable 01-Jun Interest Expense 01-Jun Cash 01-Jun Salaries and Wages 01-Jun Cash 01-Jun Rent Expense 01-Jun Cash 01-Jun Accounts Receivable 01-Jun Sales Revenue 01-Jun Cost of Goods Sold 01-Jun Inventory 50,400 Interest payment on Loan for March 350 Interest payment on Loan for March Salaries for the month of March Four weeks 2,600 Salaries for the month of March Four weeks Rent Rent for the month of April Paid 2,500 Rent for the month of April Paid Interest payment on Loan for April 350 Interest payment on Loan for April Salaries for the month of April Four weeks 3,200 Salaries for the month of April Four weeks Rent for the month of May Paid 2,500 Rent for the month of May Paid Various Equipments purchased on account 50,400 Various Equipments purchased on account Interest payment on Loan for May 350 Interest payment on Loan for May Salaries for the month of May Four weeks 3,200 Salaries for the month of May Four weeks Rent for the month of June Paid 2,500 Rent for the month of June Paid Laptops sold on account 40,000 Laptops sold on account Laptops sold on account 18,000 Laptops sold on account 350 3,200 2,500 40,000 18,000

T 25,000 350 2,500 7,800 2,640 15-Jun Accounts Payable 15-Jun Cash 01-Jul Interest Expense 01-Jul Cash 01-Jul Salaries and Wages 01-Jul Cash 01-Jul Rent Expense 01-Jul Cash 07-Jul Accounts Receivable 07-Jul Sales Revenue 07-Jul Cost of Goods Sold 07-Jul Inventory 07-Jul Cash 07-Jul Sales Revenue 07-Jul Cost of Goods Sold 07-Jul Inventory 01-Aug Interest Expense 01-Aug Cash 01-Aug Salaries and Wages 01-Aug Cash 01-Aug Rent Expense 01-Aug Cash 01-Aug Prepaid Expenses 01-Aug Cash Amount paid to vendor 25,000 Amount paid to vendor Interest payment on Loan for June 350 Interest payment on Loan for June salaries for the Salaries for the month of June Four weeks 3,200 Salaries for the month of June Four weeks Rent for the month of July Paid 2,500 Rent for the month of July Paid Computer Scanners sold on account 7,800 Computer Scanners sold on account Computer Scanners sold on account 2,640 Computer Scanners sold on account HDMI Cables sold in cash 4,660 HDMI Cables sold in cash HDMI Cables sold in cash 2,097 HDMI Cables sold in cash Interest payment on Loan for July 350 Interest payment on Loan for July Salaries for the month of July Four weeks 3,200 Salaries for the month of July Four weeks Rent for the month of Aug Paid 2,500 Rent for the month of Aug Paid Cash paid for advertisement from Aug to Jan 4,800 Cash paid for advertisement from Aug to Jan 4,660 2,097 350 3,200 2,500 4,800

20,000 350 3,200 4,000 350 28-Aug Cash 28-Aug Accounts Receivable 01-Sep Interest Expense 01-Sep Cash 01-Sep Salaries and Wages 01-Sep Cash 01-Sep Rent Expense 01-Sep Cash 08-Sep Dividend paid 08-Sep Cash 01-Oct Interest Expense 01-Oct Cash 01-Oct Salaries and Wages 01-OctCash 01-Oct Rent Expense 01-Oct Cash 03-Oct Accounts Payable 03-Oct Cash 07-Oct No entry 07-Oct No entry 31-Oct Accounts Receivable 31-Oct Sales Revenue 31-Oct Cost of Goods Sold 31-Oct Inventory Half amount received from Budget Computers 20,000 Half amount received from Budget Computers Interest payment on Loan for Aug 350 Interest payment on Loan for Aug Salaries for the month of Aug Four weeks 3,200 Salaries for the month of Aug Four weeks Rent for the month of Sep Paid 2,500 Rent for the month of Sep Paid Dividend paid to shareholders 4,000 Dividend paid to shareholders Interest payment on Loan for Sep 350 Interest payment on Loan for Sep Salaries for the month of Sep Four weeks 3,200 Salaries for the month of Sep Four weeks Rent for the month of Oct Paid 2,500 Rent for the month of Oct Paid Remainder amount paid to vendors 1,20,400 Remainder amount paid to vendors Employee Quits the Job Employee Quits the Job Computer Parts sold 57,000 Computer Parts sold Computer Parts sold 32,650 Computer Parts sold 3,200 2,500 1,20,400 57,000 32,650

350 3,200 2,500 14,400 2,400 850 01-NovlInterest Expense 01-Nov Cash 01-Nov Salaries and Wages 01-Nov Cash 01-Nov Rent Expense 01-Nov Cash 03-Nov Cash 03-Nov Unearned Revenue 15-Nov Unearned Revenue 15-Nov Sales Revenue 15-Nov Cost of Goods Sold 15-Nov Inventory 15-Nov Cash 15-Nov Accounts Receivable 01-Dec Interest Expense 01-Dec Cash 01-Dec Salaries and Wages 01-Dec Cash 01-Dec Rent Expense 01-Dec Cash 15-Dec Professional Fees 15-Dec Accounts Payable 30-Dec Prepaid Rent 30-Dec Cash Interest payment on Loan for Oct 350 Interest payment on Loan for Oct Salaries for the month of Oct Four weeks 3,200 Salaries for the month of Oct Four weeks Rent for the month of Nov Paid 2,500 Rent for the month of Nov Paid Contract price for all the 6 months received in advance 14,400 Contract price for all the 6 months received in advance First lot shipped as per the contract 2,400 First lot shipped as per the contract First lot shipped as per the contract 850 First lot shipped as per the contract Amount received from Budget corporation 10,000 Amount received from Budget corporation Interest payment on Loan for Nov 350 Interest payment on Loan for Nov Salaries for the month of Nov Four weeks (3 Employees) 2,200 Salaries for the month of Nov Four weeks (3 Employees) Rent for the month of Dec Paid 2,500 Rent for the month of Dec Paid Bill for accounting services received 2,500 Bill for accounting services received Jan 2019 Rent paid in advance 2,500 Jan 2019 Rent paid in advance 10,000 350 2,200 2,500 2,500 2,500

4,200 17,000 2,100 6,100 25,000 25,000 31-Dec Depreciation Expense 31-Dec Accumulated Depreciation 31-Dec Cash 31-Dec Accumulated Depreciation 31-Dec Loss on sale of Asset 31-Dec Equipments 31-Dec Bank Loan 31-Dec Cash 31-Dec Cash 31-Dec Common Stock 31-Dec Building 31-Dec Prepaid Rent 31-Dec Common Stock 31-Dec Interest Expense 31-Dec Interest Payable 31-Dec Salaries and Wages 31-Dec Salaries Payable 31-Dec Insurance Expense 31-Dec Prepaid Insurance Depreciation on Equipments for 7 months ending Dec 4,200 Depreciation on Equipments for 7 months ending Dec Delivery Truck sold Delivery Truck sold Delivery Truck sold 25,200 Delivery Truck sold Bank Loan retired 25,000 Bank Loan retired Shares issued to retire Bank Loan 25,000 Shares issued to retire Bank Loan Building purchased by issuing stock 2,500 Prepaid rent adjusted 3,00,000 Building purchased by issuing stock Interest accrued on Loan for Dec 350 Interest accrued on Loan for Dec Salaries for the month of Dec Four weeks (3 Employees) 2,200 Salaries for the month of Dec Four weeks (3 Employees) Insurance expense till 31 Dec 2018 expense off 1,350 Insurance expense till 31 Dec 2018 expense off 3,02,500 350 2,200 1,350