50.1K

Verified Solution

Link Copied!

Bernice decided to start business of fashion garments under the name of Designer Wear Co. from April 01, 2023. She inherited $1,000,000. She invested $300,000 out of her inheritance and borrowed $300,000 from Bank of Montreal. She purchased a commercial space of 500 sq. feet for $500,000. The space so purchased was suitably renovated to make it ready as showroom. She purchased furniture and fixtures for $75,000. Total amount of bank loan is to be repaid in 20 quarterly instalments beginning June 30, 2023. Annual rate of interest is 12% p.a.

Repayment Schedule of Bank Loan in the first year is as follows:

Due Date	Principal ($)	Interest ($)	Instalment ($)
June 30, 2023	15,000	9,000	24,000
September 30, 2023	15,000	8,550	23,550
December 31, 2023	15,000	8,100	23,100
March 31, 2024	15,000	7,650	22,650

She started business on April 01, 2022 getting it registered under Goods and Services Tax (GST). In view of further capital requirement, she further invested $200,000 in her business. She deposited Security Deposits of $5,000 for the electricity connection and $2,000 for the telephone connection. Furniture for $10,000 was purchased further.

All payments were made in cash. At the end of the year, her results showed the following:

$

Total Sales 2,000,000

Total Purchases 1,700,000

Electricity Expenses 40,000

Telephone Charges 50,000

Freight expenses 60,000

Travelling expenses 45,000

Business promotion expenses 5,000

Maintenance expenses 25,000

Miscellaneous Expenses 15,000

Electricity Expenses Payable 20,000

She withdrew $5,000 by cash each month for her personal expenses.

Bank loan installments were paid regularly.

Journalize the above transactions in the books of Designer Wear Co., post them into the Ledger and prepare the Trial Balance

Answer & Explanation Solved by verified expert

See Answer