Reference no: EM132967890

Problem - Journal Entries - The following occurred during January 2020, the first month of business for Wonder, Inc., a merchandising company. Use blank paper for your answer to this problem. Place (a) and (b) on separate sheets of paper.

1/01 Issued 60,000 shares of $5 par common stock for $700,000.

1/01 Purchased $65,000 furniture and fixtures. Wonder paid $10,000 cash and signed a 6% two-year note for the balance. The furniture and fixtures are expected to have a useful life of five years and a residual (salvage) value of $5,000.

1/01 Paid $3,600 for a one-year insurance policy.

1/01 Purchased office supplies for $18,000 on account.

1/01 Paid $8,000 for two months' rent.

1/02 Purchased $80,000 of merchandise inventory on account.

1/05 Sold inventory for $30,000 cash. The cost of the inventory sold was $18,000.

Wonder uses the perpetual inventory system.

1/15 Borrowed $50,000 from First City Bank on a six-month 9% note.

1/20 Paid for the merchandise purchased on 1/02.

1/21 Received $9,000 in advance from a customer for a special order of merchandise inventory to be delivered in February.

1/22 Placed an order with a supplier for $10,000 of merchandise inventory that will be delivered in February. Wonder will pay cash for the order when the merchandise inventory arrives.

1/30 Paid for the office supplies purchased on 1/01.

Wonder prepares adjusting journal entries monthly. A count determines that $16,000 of office supplies are on hand on 1/31. Wonder uses the straight-line method of depreciation.

(a) Prepare all necessary journal entries to record the above. If no entry is required state "NA."

(b) Prepare all necessary adjusting entries on 1/31.