Question

Prepare the following financial statements for Bozeman Ski Shop, Inc. for 2019; a Multi-Step Income Statement, the Statement of Stockholders’ Equity, and a Classified Balance Sheet, using the accrual basis of accounting.

The following transactions occurred during 2019; the first year of operations for the Bozeman Ski Shop, Incorporated.

1. BSS, Inc. was organized as a corporation in Montana on January 1, 2019. BSS sold 20,000 shares of common stock at $10 per share.

2. On Jan. 1, 2019 a ski tuning machine was purchased for $50,000. It will be used for 5 years. The straight-line method will be used, and there is no salvage value.

3. The business paid $250,000 in cash to vendors for skis.

4. A building was rented (including insurance and utilities) for 12 months at $2,500 per month; all twelve-monthly payments were paid in cash during the year.

5. In 2019, cash paying customers bought $250,000 of ski merchandise.

6. Employees were paid $110,000 for wages in 2019, which includes a $30,000 salary to the owner/manager.

7. The business also purchased $50,000 of skis on account from vendors. This amount was still owed at December 31, 2019.

8. The business also sold $150,000 of skis to customers on account. This amount was still owed at December 31, 2019.

9. The year-end inventory taken on 12/31/2019 of unsold ski merchandise amounted to $100,000 at cost.

10. On December 15^th, 2019 the corporation declared and paid cash dividends of $.50 per share.

11. The corporate income tax rate is 30%, and the income taxes will not be paid until the end of February 2020.

Having trouble with most of these journal entries. Any help would be greatly appreciated!

Answer 1

Bozeman Ski Shop, Inc. Journal Enteries Trans, Particulars 1 Cash a/c To Common Stock (Common stock issued) Dr. Debit in $ Credit in $ 200000 200000 2 Dr. 50000 Ski Tuning Machine a/c To Cash (Asset Purchased) 50000 Dr. 250000 Inventory a/c To Cash (Skis purchased) 250000 4 30000 Prepaid Rent a/c Dr. To Cash (12 months advance rent) 2500 x 12 30000 5 Dr. 250000 Cash a/c To Sales (Sales in cash) 250000 110000 Salary and Wages expense a/c Dr. To Cash (Salary and wages paid) 110000 7 Dr. 50000 Inventory a/c To Accounts Payable (Inventory on account) 50000 8 Dr. 150000 Accounts Receivable a/c To Sales (Sales on account) 150000 9 200000 200000 Cost of goods sold a/c Dr. To Inventory (To record cost of goods sold) 250000 + 50000 - 100000 = 200000 10 Dr. 10000 10000 Dividend a/c To Cash (Dividend declared and paid) 20000 x 0.50

Adjusting Enteries Trans, Particulars Income Tax Expense a/c To Income Tax Payable (Income Tax accrued) Dr. Debit in $ Credit in $ 15000 15000 12 Rent Expense a/c Dr. 30000 To Prepaid Rent (Rent expensed) assuming rent paid in January 30000 13 10000 Depreciation Expense a/c Dr. To Accum. Depreciation (To record depreciation) 50000 / 5 10000

Trial Balance For the period ending 31.12.2019 Unadjusted Adjustments Adjusted Debit in $ Credit in $ Debit in $ Credit in $ Debit in $ Credit in $ 150000 100000 150000 100000 30000 50000 30000 50000 10000 50000 Particulars Cash Accounts Receivable Inventory Prepaid Rent Ski Tuning Machine Accum. Depreciation Accounts Payable Income Tax Payable Common Stock Dividend Sales Cost of goods sold Salary and Wages expense Rent Expense Depreciation Expense Income Tax Expense Totals 10000 50000 15000 200000 15000 200000 10000 10000 400000 400000 200000 110000 30000 10000 15000 55000 200000 110000 30000 10000 15000 675000 650000 650000 55000 675000 Statement of Income For the period ending 31.12.2019 Sales Cost of goods sold Gross Profit Salary and Wages expense Rent Expense Depreciation Expense 400000 -200000 200000 110000 30000 10000 150000 50000 - 15000 35000 Income Tax Expense @ 30% Net Income