Reference no: EM133094742

Question 1 - Alfred Chan opened Mega Sports Limited ('MSL'), a sports equipment store, on 1 September 20X1. MSL completed the following transactions during September 20X1, its first month of operation:

1 Sept Received $500,000 of cash investment from Alfred, the sole proprietor.

1 Sept Prepaid office rent of $33,000 in cash.

2 Sept Purchased $150,000 of office equipment for business, of which $100,000 was paid in cash and the remaining amount to be paid to Best Office Limited within 30 days.

5 Sept Purchased $85,000 of inventory. Amount is payable to the supplier within 60 days.

12 Sept Made a sale of $57,500 on 30-days credit to 24H Fitness Centre. The cost of inventory sold is $46,000.

13 Sept Settled the amount payable to Best Office Limited.

15 Sept Made a cash sale of $29,250. The cost of inventory sold is $22,500.

20 Sept Received $30,000 cash from a customer. The products are to be shipped to the customer at 15 October 20X1.

22 Sept Alfred withdrew $20,000 for personal use.

28 Sept Received a payment of $37,500 from 24H Fitness Centre.

Additional Information:

a. Assume there is no shipping fee for all purchases and sales.

b. The monthly rent of the office is $11,000.

c. Assume depreciation is recorded only at year end, thus it can be omitted at the month end.

d. Since the last day of the month is a Sunday, the salary expense of $25,000 needs to be accrued at the month end.

Required -

1. Prepare journal entries to record the above transactions, including any necessary month-end adjustments. Explanations are not required.

2. Open the following T-accounts: Cash; Prepaid rent; Office equipment; Inventory; Accounts receivable; Accounts payable; Unearned revenue; Salary payable; Capital; Withdrawals; Revenue; Cost of goods sold; Rent expense; Salary expense. Post the journal entries from requirement 1 to their relevant T-accounts. You are required to show the ending balance of each T-account.

3. Prepare MSL's income statement for the month ended 30 September 20X1.

4. Prepare MSL's balance sheet as at 30 September 20X1.