Orlando Company Began Operations on December 1

question 181

Essay

Orlando Company began operations on December 1. The company had the following transactions during December. Record these transactions in proper form, including explanations. If an entry is not required, please write "No Entry."
a. Issued 50,000 shares of no par common stock and received $350,000 cash.
b. Extended an offer of employment to a sales manager who will begin work on January 1.
c. Purchased machinery on account for $450,000 from Tampa Company.
d. Purchased a two-year insurance policy for $4,800. Paid cash. This policy will become effective on January 1.
e. Paid $2,500 in office rent for the month of January.
f. Purchased office furniture for $50,000 with a 10% down payment and a six month note payable for the balance.
g. Paid wages of $15,000 to employees.
h. Provided services to customers on account for $85,000.
i. Paid $200,000 to Tampa Company on account.
j. Received payment in full for services rendered in part (h).
k. Paid a telephone bill for $525.

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Definitions:

Perpetual Inventory System

A perpetual inventory system is a method of accounting for inventory that records sales and purchases of goods in real-time through an inventory management system, offering accurate and up-to-date stock levels.

Ending Inventory

The value of goods available for sale at the end of an accounting period, calculated as the beginning inventory plus purchases minus cost of goods sold.

LIFO

"Last In, First Out," an inventory valuation method where goods purchased last are the first to be used or sold.

Perpetual Inventory System

A method of inventory management that records the sale or purchase of inventory immediately through the use of computerized point-of-sale systems and enterprise asset management software.