Question

Need assistance in posting to a general journal, General Ledger and an unadjusted trial balance for the following:  

On June 5 Bella Computers issued 10,000 shares of stock at $10.00 par to Dale and Lee’s parents who wanted to invest in the new company. Dale’s parents received 10,000 shares and Lee’s parents received 10,000 shares.

The electronic components to be used in the construction in the computers were contracted to be supplied by a company named Silicon Solutions. The contract specifies that for purchases of components to build up to 10,000 computers will cost $140.00 per computer. If production per year is 10,000 to 20,000 computers, the parts will cost $130.00 per computer. If production exceeds 20,000 computers per year the parts will cost $120.00 per computer. This price includes all internal components and the LCD screen. No parts have been ordered yet.

A separate contract is signed on June 8 with Custom Casings and Fabrication, Inc. The contract specifies a single price regardless of production levels. Each custom computer case and all related hardware will cost $40.00 per computer. No hardware has been ordered yet. Based on careful estimates, Dale and Lee believe that it will take 4 man hours to assemble each computer. The prevailing wage for skilled labor is $25.00 per hour. Bella Computers will offer a 1 year warranty on parts and service for their computers. Dale and Lee believe that the total warranty expense will be 2% of sales.

Answer 1

1. The first entry will be of issuance of shares.

           Lee’s parents                                100,000

           Dale’s parents 100,000

                                         Share capital                                 100,000

BELOW ARE THE ENTRIES COMPANY WILL PASS WHEN THEY DO THE REQUISITE TRANSACTION.

I HAVE JUST PRESENTED YOU WITH THE WAY OF MAKING ENTRIES AND POSTING THEM. THE QUESTION YOU ASKED IS INCOMPLETE AS NO OTHER TRANSACTION (except share issue) HAS BEEN CARRIED OUT.

BEFORE RATING THIS ANSWER, IF YOU FACE ANY ISSUE, DO ASK IN THE COMMENTS – I WILL ANSWER THEM FOR SURE.

2. Now, the entry will be of purchase of electronic components according to the production level of the company.

Purchase of raw material                                      qty.*price

                                             Silicon solutions                                         qty.*price

(qty. and price can be adjusted according to the prod. Level.)

3. Third, the purchase of hardware fittings. (same as above by changing the name of creditor)
4. Fourth, will be the due and payment of wages.

1. Wage expense                                                                  amount

Wages payable                                                          amount

2. Wages payable                                                                  amount

Cash/bank                                                                    amount

               (* the amount here will be:

no. of computers produced * 4 hours * $25)

5. If any warranty expense arises, it will be treated as a normal expense. The company may also prepare a provision for it in advance.
6. Separate accounts for each of the above heads are to be made to prepare general ledger.

The nature of each of them is:

PARTICULAR	NATURE	OPENING (DR. / CR.)
SHARE CAPITAL	CAPITAL (Equity)	CREDIT
PURCHASE OF R.M.	Real account	DEBIT
WAGE EXPENSE	Expense	DEBIT
WAGE PAYABLE	Liability	CREDIT
SILICON SOLUTIONS	Creditors	CREDIT
CC & FABRICATION INC.	Creditors	CREDIT
WARRANTY EXPENSE	Expense	DEBIT
LEE’S & DALE’S PARENTS	Personal a/c (investors/lenders)	CREDIT

7. In the end, these ledgers will be balanced and posted to the respective (dr. / cr.) sides in the trial balance.