Reference no: EM133094742
Question 1 - Alfred Chan opened Mega Sports Limited ('MSL'), a sports equipment store, on 1 September 20X1. MSL completed the following transactions during September 20X1, its first month of operation:
1 Sept Received $500,000 of cash investment from Alfred, the sole proprietor.
1 Sept Prepaid office rent of $33,000 in cash.
2 Sept Purchased $150,000 of office equipment for business, of which $100,000 was paid in cash and the remaining amount to be paid to Best Office Limited within 30 days.
5 Sept Purchased $85,000 of inventory. Amount is payable to the supplier within 60 days.
12 Sept Made a sale of $57,500 on 30-days credit to 24H Fitness Centre. The cost of inventory sold is $46,000.
13 Sept Settled the amount payable to Best Office Limited.
15 Sept Made a cash sale of $29,250. The cost of inventory sold is $22,500.
20 Sept Received $30,000 cash from a customer. The products are to be shipped to the customer at 15 October 20X1.
22 Sept Alfred withdrew $20,000 for personal use.
28 Sept Received a payment of $37,500 from 24H Fitness Centre.
Additional Information:
a. Assume there is no shipping fee for all purchases and sales.
b. The monthly rent of the office is $11,000.
c. Assume depreciation is recorded only at year end, thus it can be omitted at the month end.
d. Since the last day of the month is a Sunday, the salary expense of $25,000 needs to be accrued at the month end.
Required -
1. Prepare journal entries to record the above transactions, including any necessary month-end adjustments. Explanations are not required.
2. Open the following T-accounts: Cash; Prepaid rent; Office equipment; Inventory; Accounts receivable; Accounts payable; Unearned revenue; Salary payable; Capital; Withdrawals; Revenue; Cost of goods sold; Rent expense; Salary expense. Post the journal entries from requirement 1 to their relevant T-accounts. You are required to show the ending balance of each T-account.
3. Prepare MSL's income statement for the month ended 30 September 20X1.
4. Prepare MSL's balance sheet as at 30 September 20X1.