Question

Prepare journal entries and trial balance for:

Evergreen LTD is a new business which started trading on 1 January 2019. The following is a summary of transactions which occurred during the first period of trading: a. The owners contributed $50,000 of capital b. A delivery vehicle, bought on 1 January for $12,000 is expected to be used in the business for four years and then sold for $2,000. c. Wages totalling $30,000 were paid during the year. At the end of the year, the business owed $1,000 of wages for the last week of the year. d. Inventory totalling $200,000 was bought on credit. f. Inventory totalling $40,000 was bought for cash. g. Sales on credit totalled $300,000 (cost $150,000). h. Cash sales totalled $70,000 (cost $2,000). i. Receipts from accounts receivable totalled $24,000. j. Payments to accounts payable totalled $22,000. k. Vehicle running expenses paid totalled $8,000. l. The company tax rate is 33%.

Answer 1

Evergreen LTD
Journal entries
Date	Account	Debit	Credit	Calculation
a	Cash	$     50,000
	Capital		$     50,000
b	Delivery Van	$     12,000
	Cash		$     12,000
c1	Wages Expense	$     30,000
	Cash		$     30,000
c2	Wages Expense	$        1,000
	Wages Payable		$        1,000
d	Inventory	$   200,000
	Accounts Payable		$   200,000
f	Inventory	$     40,000
	Cash		$     40,000
g	Accounts Receivable	$   300,000
	Sales		$   300,000
	Cost of goods sold	$   150,000
	Inventory		$   150,000
h	Cash	$     70,000
	Sales		$     70,000
	Cost of goods sold	$        2,000
	Inventory		$        2,000
i	Cash	$     24,000
	Accounts Receivable		$     24,000
j	Accounts Payable	$     22,000
	Cash		$     22,000
k	Vehicle Expenses	$        8,000
	Cash		$        8,000
Adjusting entries
AJE 1	Depreciation expense	$        2,500		=(12,000-2,000)/4
	Accumulated Depreciation		$        2,500
AJE 2	Income taxes expense	$     58,245		=176,500*33%
	Income Taxes Payable		$     58,245	Refer Income Stmt

Evergreen LTD	Unadjusted TB			Adjusted TB
Account Names	Debit	Credit		Debit	Credit
Cash	32,000			32,000
Accounts Receivable	276,000			276,000
Inventory	88,000			88,000
Delivery Van	12,000			12,000
Accumulated Depreciation		-			2,500
Accounts Payable		178,000			178,000
Wages Payable		1,000			1,000
Income Taxes Payable		-			58,245
Capital		50,000			50,000
Sales		370,000			370,000
Cost of goods sold	152,000			152,000
Wages Expense	31,000			31,000
Vehicle Expenses	8,000			8,000
Depreciation expense	-			2,500
Income taxes expense	-			58,245
Totals	599,000	599,000		659,745	659,745

Evergreen LTD
Income Statement
For the Year Ended December 31
Sales		370,000
Cost of goods sold		152,000
Gross Profit		218,000
Operating expenses
Wages Expense	31,000
Vehicle Expenses	8,000
Depreciation expense	2,500
Total Operating expenses		41,500
Operating Income		176,500
Income tax expense		58,245	=176,500*33%
Net Income		118,255