The following transactions occurred during March 2009 for the Wainwright Corporation. The company owns and operates a wholesale warehouse.
1. Issued 30,000 shares of common stock in exchange for $300,000 in cash.
2. Purchased equipment of a cost of $40,000. $10,000 cash was paid and a note payable was signed for the balance owed.
3. Purchased inventory on account at a cost of $90,000. The company uses the perpetual inventory system.
4. Credit sales for the month totaled $120,000. The cost of the goods sold was $70,000.
5. Paid $5,000 in rent on the warehouse building for the month of March.
6. Paid $6,000 to an insurance company for fire and liability insurance for a one-year period beginning April 1,2009.
7. Paid $70,000 on account for the merchandise purchased in 3.
8. Collected $55,000 from customers on account.
9. Recorded depreciation expense of $1,000 for the month on the equipment.
4. Credit sales for the month totaled $120,000. The cost of the goods sold was $70,000.
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1. Issuing 30,000 shares of common stock for $300,000 in cash:
To record this transaction, you will need to debit Cash for $300,000 and credit Common Stock for $300,000.
2. Purchasing equipment for a cost of $40,000:
To record this transaction, you will need to debit Equipment for $40,000 and credit Cash for $10,000 (the amount paid in cash) and Notes Payable for $30,000 (the balance owed).
3. Purchasing inventory on account at a cost of $90,000:
To record this transaction, you will need to debit Inventory for $90,000 and credit Accounts Payable for $90,000.
4. Recording credit sales of $120,000 with a cost of goods sold of $70,000:
To record this transaction, you will need to debit Accounts Receivable for $120,000 (the amount charged to customers) and credit Sales Revenue for $120,000. Additionally, you will need to debit Cost of Goods Sold for $70,000 and credit Inventory for $70,000.
5. Paying $5,000 in rent for the warehouse building for the month of March:
To record this transaction, you will need to debit Rent Expense for $5,000 and credit Cash for $5,000.
6. Paying $6,000 to an insurance company for fire and liability insurance for a one-year period beginning April 1, 2009:
To record this transaction, you will need to debit Prepaid Insurance for $6,000 and credit Cash for $6,000.
7. Paying $70,000 on account for the merchandise purchased in transaction 3:
To record this transaction, you will need to debit Accounts Payable for $70,000 and credit Cash for $70,000.
8. Collecting $55,000 from customers on account:
To record this transaction, you will need to debit Cash for $55,000 and credit Accounts Receivable for $55,000.
9. Recording depreciation expense of $1,000 for the month on the equipment:
To record this transaction, you will need to debit Depreciation Expense for $1,000 and credit Accumulated Depreciation for $1,000.
To analyze the transactions and determine the net income for the month of March 2009 for the Wainwright Corporation, you need to follow several steps:
1. Start by identifying the revenue and expense items from the transactions:
- Revenue:
- Credit sales: $120,000
- Expenses:
- Cost of goods sold: $70,000
- Rent expense: $5,000
- Insurance expense: $500 (6,000/12 months)
2. Calculate the gross profit:
Gross Profit = Revenue - Cost of Goods Sold
Gross Profit = $120,000 - $70,000
Gross Profit = $50,000
3. Determine the operating expenses:
Operating Expenses = Rent Expense + Insurance Expense + Depreciation Expense
Operating Expenses = $5,000 + $500 + $1,000
Operating Expenses = $6,500
4. Calculate net income:
Net Income = Gross Profit - Operating Expenses
Net Income = $50,000 - $6,500
Net Income = $43,500
Therefore, the net income for the month of March 2009 for the Wainwright Corporation is $43,500.
Note: To analyze additional aspects of the financial position, you may need to consider other financial statements such as the balance sheet and cash flow statement.