Forester Company has just finished their first year of operations. During the year the following transactions occurred.

1. Formed a company on January 1, with $100,000 cash received from common shareholders and a $30,000 bank loan bearing interest at 4%, none of which the company will pay until the first day of next year. No principal payment is required for two years on the loan.
2. Paid $70,000 to landlord – rent is $5,000 per month with one month's rent paid in advance and a damage deposit for $5,000.
3. Purchased furniture with a 12-year useful life costing $16,800 with cash at the beginning of the year.
4. Paid $2,700 for an insurance policy covering an 18-month period for the office contents at the beginning of the year.
5. During the year, bill clients for consulting work amounting to $420,000 of which 60% should be collected by the end of the year. Of the remaining amount to be collected, assume 20% of this amount will be uncollectible.
6. Incurred salaries amounting to $280,000 with all but $30,000 paid by the end of the year.
7. The corporate tax rate is 30% and the company will not pay any income tax until the following year. Please ignore GST.
8. The company declared and paid a $15,000 dividend at year-end.

Prepare the journal entries and create a Statement of Financial Performance.

Answer rating: 100% (QA)

Journal Entries Account titles and explanation Debit Credit Cash 100000 To Common Stock 100000 To Re... View the full answer