Problem and Solution

Problem:

XYZ Company, a retail business, undertook the following transactions during the month of January:

1. On January 1, the company sold merchandise for cash amounting to $5,000.
2. On January 5, inventory was purchased on credit for $3,000.
3. Salaries amounting to $2,000 were paid to employees on January 10.
4. Cash payments amounting to $4,000 were received from customers on account on January 15.
5. On January 20, merchandise was sold on credit totaling $6,000.
6. Half of the due amount to suppliers, $1,500, was paid on January 20.
7. Cash collections from credit customers amounted to $5,500 on January 30.
8. Utility expenses incurred on credit were $1,200 on January 31.

Prepare the necessary journal entries, post them to ledger accounts, and then prepare a trial balance for XYZ Company as of January 31.

Solution:

Journal Entries:

• January 1: Cash $5,000; Sales Revenue $5,000
• January 5: Inventory $3,000; Accounts Payable $3,000
• January 10: Salaries Expense $2,000; Cash $2,000
• January 15: Cash $4,000; Accounts Receivable $4,000
• January 20: Accounts Receivable $6,000; Sales Revenue $6,000
• January 20: Accounts Payable $1,500; Cash $1,500
• January 30: Cash $5,500; Accounts Receivable $5,500
• January 31: Utilities Expense $1,200; Accounts Payable $1,200

Ledger Accounts:

• Cash: Initial balance $0; Ending balance $10,800
• Sales Revenue: Initial balance $0; Ending balance $11,000
• Inventory: Initial balance $0; Ending balance $3,000
• Accounts Payable: Initial balance $0; Ending balance $4,700
• Accounts Receivable: Initial balance $0; Ending balance $5,500
• Salaries Expense: $2,000
• Utilities Expense: $1,200

Trial Balance:

This solution showcases the recording of transactions, posting to ledger accounts, and preparation of a trial balance for XYZ Company for the month of January.