Question

College Coasters is a San Diego–based merchandiser specializing in logo-adorned drink coasters. The company reported the following balances in its unadjusted trial balance at December 1.

Cash	$	9,800
Accounts Receivable		1,900
Inventory		500
Prepaid Rent		540
Equipment		660
Accumulated Depreciation		110
Accounts Payable		1,380
Salaries and Wages Payable		300
Income Taxes Payable		0
Common Stock		6,400
Retained Earnings		2,600
Sales Revenue		14,180
Cost of Goods Sold		7,570
Rent Expense		990
Salaries and Wages Expense		1,600
Depreciation Expense		110
Income Tax Expense		0
Office Expenses		1,300

The company buys coasters from one supplier. All amounts in Accounts Payable on December 1 are owed to that supplier. The inventory on December 1 consisted of 1,000 coasters, all of which were purchased in a batch on July 10 at a unit cost of $0.50. College Coasters records its inventory using perpetual inventory accounts and the FIFO cost flow method.

During December, the company entered into the following transactions. Some of these transactions are explained in greater detail below.

1. Purchased 400 coasters on account from the regular supplier on 12/1 at a unit cost of $0.52, with terms of n/60.
2. Purchased 1,000 coasters on account from the regular supplier on 12/2 at a unit cost of $0.55, with terms of n/60.
3. Sold 1,900 coasters on account on 12/3 at a unit price of $1.10.
4. Collected $970 from customers on account on 12/4.
5. Paid the supplier $1,380 cash on account on 12/18.
6. Paid employees $490 on 12/23, of which $300 related to work done in November and $220 was for wages up to December 22.
7. Loaded 100 coasters on a cargo ship on 12/31 to be delivered the following week to a customer in Kona, Hawaii. The sale was made FOB destination with terms of n/60.

Other relevant information includes the following at 12/31:

8. College Coasters has not yet recorded $190 of office expenses incurred in December on account.
9. The company estimates that the equipment depreciates at a rate of $9 per month. One month of depreciation needs to be recorded.
10. Wages for the period from December 23–31 are $100 and will be paid on January 15.
11. The $540 of Prepaid Rent relates to a six-month period ending on May 31 of next year.
12. The company incurred $700 of income tax but has made no tax payments this year.
13. No shrinkage or damage was discovered when the inventory was counted on December 31.
14. The company did not declare dividends and there were no transactions involving common stock.

Purchased 400 coasters on account from the regular supplier on 12/1 at a unit cost of $0.52, with terms of n/60. Record the transaction. Note: Enter debits before credits. General Journal Credit Date Dec 01 Debit 208 Inventory Accounts Payable 208

Please answer it fully by filling in the proper blanks - 15 entries, income statement, balance sheet, and the inventory turnover ratio + days to sell.

All required information is presented here.

Answer 1

College Coasters Journal Enteries Trans. Particulars a. Inventory a/c Dr. To Accounts Payable (Inventory on account) 400 x 0.52 Debit in $ Credit in $ 208 208 b. 550 Inventory a/c Dr. To Accounts Payable (Inventory on account) 1000 x 0.55 550 2090 Accounts Receivable a/c Dr. To Sales (Sales on account) 1900 x 1.10 2090 983 Cost of goods sold a/c Dr. 983 To Inventory (To record cost of goods sold) 1000 x 0.50 = 500 + 400 x 0.52 ) + ( 500 0.55) d. 970 Cash a/c Dr. To Accounts Receivable (Cash from debtors) 970 1380 Accounts Payable a/c Dr. To Cash (Cash paid to Supplier) 1380 Dr. 710 Salaries expense a/c To Cash (Wages paid) 710 No Journal Entry

Adjusting Enteries Trans. Particulars Office Expense a/c Dr. To Accounts Payable (Office expense on account) Debit in $ Credit in $ 190 190 Depreciation a/c Dr. To Accumulated Depreciation -Equip (To record depreciation) j. 100 Salaries expense a/c Dr. To Salaries Payable (Salary Expense accrued) 100 k. 90 Rent Expense a/c Dr. To Prepaid Rent (Insurance expensed) 540/6 90 700 Income tax expense a/c Dr. To Income tax payable (Income tax expense accrued) 700 m. No Journal Entry n. No Journal Entry

Adjusting Enteries Trans. Particulars Office Expense a/c Dr. To Accounts Payable (Office expense on account) Debit in $ Credit in $ 190 190 Depreciation a/c Dr. To Accumulated Depreciation -Equip (To record depreciation) j. 100 Salaries expense a/c Dr. To Salaries Payable (Salary Expense accrued) 100 k. 90 Rent Expense a/c Dr. To Prepaid Rent (Insurance expensed) 540/6 90 700 Income tax expense a/c Dr. To Income tax payable (Income tax expense accrued) 700 m. No Journal Entry n. No Journal Entry

Trial Balance For the period ending Decemeber 31 275 Particulars Cash Accounts Receivable Inventory Prepaid Rent Equipment Accumulated Depreciation Accounts Payable Salaries and Wages Payable Income Taxes Payable Common Stock Retained Earnings Sales Revenue Cost of Goods Sold Rent Expense Salaries and Wages Expense Depreciation Expense Income Tax Expense Office Expenses Totals Unadjusted Adjustments Adjusted Debit in $ Credit in $ Debit in $ Credit in $ Debit in $ Credit in $ 8680 8680 3020 3020 275 540 450 660 660 110 119 758 190 948 300 100 400 700 700 6400 6400 2600 2600 16270 16270 8553 8553 990 90 1080 2310 2410 110 9 119 700 700 1300 190 1490 26438 26438 1089 1089 27437 27437 Statement of Income For the period ending Decemeber 31 Sales Revenue Cost of Goods Sold Gross Profit Rent Expense Salaries and Wages Expense Depreciation Expense Office Expenses 16270 -8553 7717 1080 2410 119 1490 5099 2618 -700 1918 Income Tax Expense Net Income Statement of Retained Earnings For the period ending Decemeber 31 Beginning Balance Net Income 2600 1918 4518

Amounts in $ Amounts in $ Balance sheet As at December 31 Assets Current Assets Cash Accounts Receivable Inventory Prepaid Rent Amounts in $ Amounts in $ Liabilities Current Liabilities 8680 Accounts Payable 3020 Salaries and Wages Payable 275 Income Taxes Payable 450 12425 948 400 700 2048 Non Current Assets Equipment Accumulated Depreci Total Assets 660 -119 Shareholders Equity Common Stock 541 Retained Earnings 12966 Total Liabilities & Equity 6400 4518 10918 12966 Inventory Turnover Ratio = Cost of goods old / Avg. Inventory = 8553/( 275 +500)/2 = 8553 / 388 = 22.04 Days to sell = 365 / Inventory Turnover Ratio = 365 / 22.04 = 16.56 Days