Question

Kochi Services was formed on May 1, 2020. The following transactions took place during the first month (amounts in thousands). Transactions on May 1: 1. Rahul Shah invested INR40,000 cash in the company, as its sole owner. 2. Hired two employees to work in the warehouse. They will each be paid a salary of INR3,050 per month. 3. Signed a 2-year rental agreement on a warehouse; paid INR24,000 cash in advance for the first year. 4. Purchased furniture and equipment costing INR30,000. A cash payment of INR10,000 was made immediately; the remainder will be paid in 6 months. 5. Paid INR1,800 cash for a one-year insurance policy on the furniture and equipment. Transactions during the remainder of the month: 6. Purchased basic office supplies for INR420 cash. 7. Purchased more office supplies for INR1,500 on account. 8. Total revenues earned were INR20,000—INR8,000 cash and INR12,000 on account. 9. Paid INR400 to suppliers for accounts payable due. 10. Received INR3,000 from customers in payment of accounts receivable. 11. Received utility bills in the amount of INR380, to be paid next month. 12. Paid the monthly salaries of the two employees, totaling INR6,100. Instructions a. Prepare journal entries to record each of the events listed. (Omit explanations.) b. Post the journal entries to T-accounts. c. Prepare a trial balance as of May 31, 2020

Answer 1

Answer:

See explanation Section Below:

Explanation:

Requirement A

                               Kochi Services

                                Journal entry

1. May 1   Cash            Debit           INR40,000

               Capital               Credit              INR40,000

(Invested cash as sole owner but not for common stock)

2. No entry required

(Because the owner has not paid the wages for the employees)

3. Prepaid Rent                Debit          INR24,000

Cash                                     Credit            INR24,000

(Signed a rental agreement of 2 years for a warehouse by paying cash in advance)

4. Furniture and Equipment    Debit        INR30,000

Cash                                                    Credit           INR10,000

Accounts payable                               Credit           INR20,000

(Purchase furniture and equipment on account and cash)

5. Prepaid Insurance              Debit          INR1,800

Cash                                         Credit         INR1,800

(Paid insurance in advance for furniture and equipment)

6. Office supplies             Debit     INR420

Cash                                  Credit      INR420

(Paid cash for office supplies)

7. Office supplies         Debit      INR1,500

Accounts payable           Credit      INR1,500

(Purchase office supplies on account)

8. Cash                         Debit        INR8,000

Accounts receivable   Debit        INR12,000

Revenues                                Credit       INR20,000

(Receive cash for providing services and performed services on account)

9. Accounts payable    Debit       INR400

Cash                              Credit           INR400

(Paid cash for office supplies due on transaction 7)

10. Cash            Debit     INR3,000

Accounts receivable  Credit     INR3,000

(Receive cash from customers due on transaction 8)

11. Utilities expense   Debit     INR380

Utilities payable           Credit     INR380

(Utilities bill to be paid on the next month)

12. Salaries expense        Debit     INR6,100

Cash                                     Credit    INR6,100

(Paid cash on salaries expenses)

Requirement B

See the image below

Requirement C

                          Kochi Services

                           Trial Balance

                           May 31, 2020

Account Title                                Debit (INR)          Credit (INR)

Cash                                                8,280

Accounts Receivable                     9000

Capital                                                                           40,000

Prepaid Rent                     24,000

Furniture & Equipment    30,000

Prepaid Insurance            1,800

Salaries Expense            6,100

Accounts Payable                                             21,100

Utilities Expense             380

Revenues                                                     20,000

Office Supplies             1920

Utilities Payable                                              380          

Total                                         INR 81,480              INR 81,480