Transaction Analysis $-$ September

Mavtech: A Comprehensive Example

Rachel started Mavtech Inc, a computer retail business on September $1,2023.$ What follows

is description of significant events that affected Mavtech Inc during September $2023.$

$1.$ On September $1,$ Mavtech issued $6000$ shares at par to Rachel for cash. The par value of each

share is $$10.$

$2.$ On September $1,$ Mavtech borrowed $$72,000$ from a bank on a four$-$year loan. The interest rate

on the loan is $10\%$ per annum. Interest is payable annually on Sep $1$st of each year. The principal

amount that was borrowed is due in one single repayment at the end of $4$ years.

$3.$ On September $1,$ Mavtech paid $$6,000$ toward rent on the store for the rest of $2019.$ The rent

includes all utilities.

$4.$ On September $1,$ Mavtech acquired furniture and fixtures for $$14,000$ and made a down payment

of $$3,000.$ The remaining payment will be made in October. The furniture and fixtures have an

estimated useful life of $5$ years, at the end of which they are expected to be sold for $$2,000.$

$5.$ On September $1,$ Mavtech acquired $4$ cash registers for $$6,000$ in cash. This equipment has a

useful life of $3$ years after which they are expected to be sold for $$600.$

$6.$ On September $9,$ Mavtech paid $$30,000$ in advance to suppliers to buy $30$ computers.

$7.$ On September $10,$ Mavtech paid $$450$ and bought office supplies inventory.

$8.$ The computers that were paid for on September $9$th were delivered to Mavtech on

September $14.$

$9.$ On September $17,$ a customer placed an order on Mavtech for $25$ computers for a total price of

$$31,000.$

$10.$ On September $21,$ Mavtech hired an employee. The employee$$s wage was fixed at $$2,400$ per

month. The employee will be paid every month on the $21$st$.$ The first payment will be made on

October $21.$

$11.$ On September $22,$ Mavtech purchased an additional $40$ computers for $$40,000$ on credit, due

for payment on October $12.$

$12.$ Computers pertaining to the order placed on September $17,$ were delivered to the customer on

September $27.$ The customer agreed to pay in five days.

$13.$ On September $28,$ Mavtech purchased office supplies inventory for $$350$ by paying cash.

$14.$ On September $29,$ Mavtech sold $15$ computers at a total price of $$20,700$ for cash.

$15.$ Miscellaneous expenses of $$650$ were incurred during September. These expenses were paid

in cash.

$16.$ On September $29$th$,$ Mavtech received $$5,400$ as payment in advance from a customer for $3$

computers to be delivered on October $4.$

$17.$ On September $30,$ Rachel took $$500$ from Mavtech as dividends in cash.

Transactions

The transactions below pertain to Mavtech$$s second month $($October$)$ of operations.

$1.$ Paid $$11,000$ to the supplier to complete payment on the furniture and fixtures

bought on September $1,2023($refer to transaction $4$ of September$).$

$2.$ Delivered the $3$ computers to the customer for which advance payment of $$5,400$

was received in September. The full invoice value of the sale was received in

advance.

$3.$ Paid $$40,000$ to the supplier to complete payment of the $40$ computers that were

bought on September $22,2023($refer to transaction $11$ of September$).$

$4.$ The customer who owed $$31,000($refer to September transactions$)$ paid the amount

to Mavtech.

$5.$ Purchased and received office supplies for $$1,200$ by paying cash in October.

$6.$ Purchased $60$ computers in October for $$1,000$ each, and paid $$25,000$ cash to the

supplier, with the remaining amount to be paid in November.

$7.$ Sold $50$ computers in October for $$1,400$ each, received $$20,000$ cash, with the

remaining amount to be collected in November.

$8.$ Paid $$2,400$ to the employee on October $21$st towards wages for the period

September $21$ to October $20$th$.$

$9.$ Rachel took $$600$ as dividends in cash from Mavtech.

$10.$ On October $31$st$,$ Rachel realized that most of her business was commercial. She did not need as many cash registers. So$,$ she sold three of the four cash registers for $$4,000$ cash. $($Be sure to take into account the book value at the time of the sale and recognize a gain or loss on the sale.$)$

Required:

$1.$ Enter beginning balances in Ledger t$-$accounts $($from September closing trial balance$)$

$2.$ Prepare journal entries for all transactions listed above.

$3.$ Post those entries to t$-$accounts and prepare an unadjusted trial balance.

$4.$ Prepare journal entries for any adjusting entries required. When doing so$,$ consider the following additional information:

a$.$ At the end of the day on October $31$st$,$ Rachel counted the office supplies inventory and found that $$500$ worth of inventory was on hand.

b$.$ Rachel figured that the income tax on the profits Mavtech Inc made during October would be $$500.$ The tax will be paid to the IRS only in December $2019$

$5.$ Prepare an adjusted trial balance

$6.$ Prepare $($in good form$)$ the financial statements for the month.

$7.$ Prepare closing journal entries and a post$-$closing trial balance.