Question: Veronica Regaldo creates a new business in Mexico on January

Veronica Regaldo creates a new business in Mexico on January 1, Year 8, to operate a retail store. Transactions of Regaldo Department Stores during January Year 8 in preparation for opening its first retail store in February Year 8 appear below. Regaldo applies IFRS and reports its results in thousands of Mexican pesos ($).
(1) January 1, Year 8: Receives $500,000 from Veronica Regaldo for all of the common stock of Regaldo Department Stores. The stock has no par or stated value.
(2) January 5, Year 8: Pays another firm $20,000 for a patent, and pays the Mexican government $4,000 to register the patent. IFRS treats the cost to register the patent as part of its acquisition cost.
(3) January 10, Year 8: Orders merchandise from various suppliers at a cost of $200,000.
See transactions (5), (6), and (7) for later information regarding these merchandise orders.
(4) January 15, Year 8: Signs a lease to rent land and a building for $30,000 a month. The rental period begins February 1, Year 8. Regaldo pays $60,000 for the first two months’ rent in advance.
(5) January 20, Year 8: Receives the merchandise ordered on January 10, Year 8. Regaldo delays payment for the merchandise until it receives an invoice from the supplier—see transaction (7) below.
(6) January 21, Year 8: Discovers that merchandise costing $8,000 is defective and returns the items to the supplier.
(7) January 25, Year 8: Receives invoices for $160,000 for the merchandise received on
January 20, Year 8. After subtracting an allowed discount of 2% of the invoice for paying promptly, Regaldo pays the suppliers the amount due of $156,800 (0.98 × $160,000). The firm treats cash discounts taken as a reduction in the acquisition cost of the merchandise.
(8) January 30, Year 8: Obtains fire and liability insurance coverage from Windwards Islands Insurance Company for the period beginning February 1, Year 8. It pays the one-year insurance premium of $12,000.
a. Record these eight transactions in T-accounts.
b. Prepare a balance sheet for Regaldo Department Stores on January 31, Year 8.

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  • CreatedMarch 04, 2014
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