Genesis Sportswear Ltd. is a wholesale company that buys sports clothing from manufacturers and sells it to retail stores. It had the following transactions in its first year of operations. The company's fiscal year end is December 31.
1. Common shares were issued for $60,000.
2. An insurance premium that provides coverage for the 12-month period starting March 1 was bought for $1,200 on February 15.
3. Clothing was purchased for $75,000 on account.
4. Employees were paid $46,900 in wages.
5. Other operating expenses totalled $10,000. Of this amount, $9,000 was paid during the year; the remainder was due to be paid early in the next year.
6. Sales recorded for the period totalled $105,000, all on credit.
7. The cost of the inventory sold during the year was $62,000.
8. Cash collections on customer accounts totalled $96,000.
9. Payments to suppliers for clothing purchased totalled $54,000.
10. New equipment was purchased for $15,000 cash.
11. Dividends of $6,000 were declared but not yet paid.
Adjusting entries
12. Recognized the amount of insurance expense that was incurred during the period.
13. Recorded depreciation of $2,000 on the equipment.
Required:
a. Prepare journal entries to record transactions 1 through 11.
b. Create T accounts, post the journal entries to them, and determine the unadjusted balance in each account.
c. Prepare a trial balance.
d. Prepare journal entries for items 12 and 13, post these adjustments, and calculate the adjusted balances in the affected accounts.
e. Prepare the closing entries, post them to the T accounts, and determine the final balance in each account.