Question

I need help with this case. Can somebody please do journal entry and T -Accounts for this problem?

Mineral Water In February 2009, Mr. Alan Pickering contracted to purchase a mineral spring in the Missouri Ozarks. The property, known locally as Verona Springs, included a 6 million gallon-per-day spring that produced exceptionally pure water. Mr. Pickering planned to bottle the water and sell it in the nearby cities of Springfield, Columbia, St. Louis, and Kansas City. On March 1, 2009, Mr. Pickering and several relatives purchased 500,000 shares in the company for $1 per share. On that same day, the corporation borrowed $300,000 from the local bank. The bank note required five annual $60,000 principal repay- ments beginning March 1, 2010. Interest payments of 6% of the outstanding balance on the previous March 1 were required on March 1 of each year, also beginning March 1, 2010. The firm then wrote a check for $525,000 to buy the 65 acres of land that included Verona Springs. The water was nearly free of pollutants, but it arose into a small pond before flow- ing to a nearby stream. In the pond, the water was exposed to falling leaves and other contaminants. To maintain purity, Mr. Pickering hired a local firm to drill a flowing artesian well near the spring (in a flowing artesian well, pressure from an underground aquifer forces water to flow naturally to the surface). The company paid $1,000 cash for the drilling on March 10, 2009. Mr. Pickering expected the well to last at least 10 years before redrilling would be needed. During March, Verona Springs had a building constructed above and around the well. Inside the building, the firm installed filtration, purification, and bottling equip- ment and a holding tank. The company paid the $240,000 cost by check on March 31, 2009, when the equipment became operational. The firm expected the building and equipment to last 10 years. On April 5, the firm purchased a truckload of 18,200 one- gallon plastic water bottles and lids for $3,200, and 3,100 shipping boxes for $3,100 ($1.00 per box). The $6,300 for those purchases was payable in 30 days. During April, the firm also purchased miscellaneous supplies for $500 and paid in cash. The firm began bottling water by hiring three local residents to work part-time. During April, they bottled and shipped 18,000 gallons of mineral water (3,000 cases that each contained six 1-gallon bottles). Verona sold the 3,000 cases to regional su- permarkets for $5.00 per case. One chain paid for 1,000 cases by check upon receipt; the others purchased on account, payable in 30 days. In late April, the firm paid the three employees a total of $1,500 in cash for their work and also paid a trucking firm $900 in cash to deliver the water. On April 30, the firm had negligible quantities of bottles, lids, boxes, and supplies in inventory.

Answer 1

1) 01.03.2009   By Bank A/c Dr.     $500000

                    To Common Share   $500000

                     (Entry for Share Capital)

2) 01.03.2009   By Bank A/c Dr.         $300000

   To Loan A/c               $300000

                   (Entry for Borrowing Money from Bank)

3) 10.03.2009   By Drilling Expenses A/c Dr.         $1000

   To Cash A/c                  $1000

                   (Entry for Payment of drilling expenses)

4) 31.03.2009   By Building under Construction A/c Dr.         $240000

   To Bank A/c                                               $240000

                   (Entry for Borrowing Money from Bank)

5) 05.04.2009   By Purchase A/c Dr.        $6300

   To Accounts Payable A/c              $6300

                   (Entry for Purchase on credit)

6) 05.04.2009   By Purchase A/c Dr.        $500

   To Cash A/c                                $500

                   (Entry for Misc supply Purchase on Cash)

7) April    By Accounts Receivable A/c Dr.         $15000

   To Sales A/c                 $15000

                   (Entry for Sale of 3000 cases @ $5)

8) April            By Cash A/c Dr.        $5000

   To Accounts Receivable A/c              $5000

                   (Entry for Cash Receipt of 1000 case)

9) 30.04.2009   By Wages A/c Dr.        $1500

   To Cash A/c                             $1500

                   (Entry for payment to three employee)

10) 30.04.2009   By Freight outward A/c Dr.        $900

   To Cash A/c                               $900

                   (Entry for payment of freight to trucking firm)

11) 01.03.2010 By Interest A/c Dr.         $18000

      To Loan A/c               $18000

                 (Entry for Interest on Loan from Bank)

12) 01.03.2010 By Loan A/c Dr.        $60000

      To Bank A/c              $60000

                 (Entry for repayment of Loan)

T Accounts is as under:

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