The Trend was started on January 2, 2021, by Michael Pearson as a sole proprietorship business. The business trades in an array of coloured and custom-made graphic T-shirts. The mission statement of the business is “Dream it, wear it, live it”. Michael Pearson’s goal is to provide high-quality inexpensive T-shirts for his customers.

Today is 10 Feb 2021, and you have been asked as his junior accountant to prepare a complete set of books for the first month of the year and have been presented with the following business transactions for the month:

Date Transactions

2-Jan Started business with $150,000 in cash.
2-Jan Opened a business bank account and deposited cash of $35,000 3-Jan Rented a shop in the Port Arcade paying by cash, $16,000.

Purchased the following T-Shirts on credit: Invoice number TLAB101 5 White coloured for $300 per shirt
5 Army Green coloured for $400 per shirt

10-Jan 5 Navy Blue coloured for $400 per shirt. 5 Burgundy coloured for $400 per shirt.

5 Black coloured for $300 per shirt.
5 Royal Blue coloured for $400 per shirt.

18-Jan Purchased a Cash Register for $14,500 cash.
21-Jan Sold three (3) White T-shirts $3,000, each. A cheque was received for the sales.

Sold the following T-shirts on credit to The Tivoli Garden High School Dance Society: Invoice number – IAM01

13-Jan	All the shirts bought on January 10, 2021, were taken to 'Hot Off The Press to have the word “EXTREME” printed on the front of each T-shirt. The printing cost was paid in cash, $1,200 per shirt.
15-Jan	Paid Tees Limited a cheque for the T-shirts bought on January 10, 2021. Tees Limited offered a 2.5% settlement discount if payment is made within 7 days of having received the goods.

22-Jan 1 White 1 Black

2 Navy Blue 3 Army Green 1 Royal Blue

- $3,000 per shirt - $3,000 per shirt

- $4,000 per shirt - $4,000 per shirt - $4,000 per shirt

28-Jan Sold 5 Burgundy T-shirts for cash. Each was sold for $4,000 per shirt.

Sold 3 Black T-shirts on credit for $3,000 each to Marlene Palmer Variety Store. 30-Jan Invoice number – IAM02

29-Jan

We received a cheque from the Tivoli Garden High School for the purchase made on January 22, 2021. We allowed them a discount of 1.5% for having made it within 10 days.

Marlene Palmer returned one of the T-shirts sold to her due to a spelling error. Note 31-Jan Number – CR003

Additional Information:

1. 1) The closing inventory of T-shirts on January 31, 2019, was valued at $4,500.

2. 2) At the end of January 31, 2019, rent of $6,500 was paid in advance for February and March

   of the following year.

3. 3) The electricity and telephone bills were due but remained unpaid as at January 31, 2019. The

   amounts were $1,500 and $1,000 respectively.

4. 4) All T-shirts were bought from Tees Limited.

5. 5) Please use the invoice/note numbers as indicated in the relevant transactions.

Required:

(a) Record the above transactions in the appropriate books of original entry for the month of January 2021.

(b) Post to and balance off the accounts in the relevant ledgers.

2. (c) Extract a trial balance.

3. (d) Prepare an income statement at the end of the first month of the year.

4. (e) Prepare a statement of financial position as of 31 January 2021.

   
   

Answer rating: 100% (QA)

1 Journal Enteries Journal Entries 2Jan19 Cash Account Dr 150000 To Capital Account Cr 150000 Bank Account Dr 35000 To Cash Account Cr 35000 3Jan19 Rent Expenses Account Dr 16000 To Cash Account Cr 16... View the full answer