Question

Journal Entries and Calculations:

Davis Consulting is both doing consulting service and selling accounting software and uses the perpetual inventory system to account for software inventory. During January, Davis Consulting completed the following transactions:

Jan. 1 Issued 10,000 of shares with the par value of $5, received $100,000.

2 Completed a consulting engagement and received cash of $7,800.

2 Prepaid three months office rent, $1,650.

7 Purchased 80 units software inventory on account, $1,680, plus freight in, $80. (5/15, EOM)

18 Sold 40 software units on account, $3,500 (cost $880). (3/10, n/30)

19 Borrow 5,000 of cash from a bank.

20 Paid employee salaries, $2,055, which includes accrued salaries from December of 1,000.

21 Paid on account, $1,760.

22 Received full payment of the sale on Jan. 18.

24 Paid utilities, $250.

25 Paid for half of the inventory bought in Jan. 7.

28 Bought 1,000 shares of stock back and paid for 7,000. (cost method)

31 Recorded the following adjusting entries:

a. Accrued salaries expense, $686

b. depreciation, $100 (equipment, $30; Furniture, $70)

c. expiration of prepaid rent, $550

Answer 1

Date	Account Titles and Explanation	Debit	Credit
Jan 1	Cash	$100,000
	Common Stock		$50,000
	Paid-in capital - excess of par		$50,000
	(To record issue of common stock)
Jan 2	Cash	$7,800
	Service Revenue		$7,800
	(To record collected cash on service revenue)
Jan 2	Prepaid Rent	$1,650
	Cash		$1,650
	(To record payment of prepaid office rent.)
Jan 7	Software Inventory	$1,760
	Accounts Payable		$1,760
	(To record purchase of software inventory on account)
Jan 18	Accounts Receivable	$3,500
	Sales Revenue		$3,500
	Cost of Goods Sold	$880
	Software Inventory		$880
Jan 19	Cash	$5,000
	Short-term Loan		$5,000
Jan 20	Accrued Salaries	$1,000
	Salaries Expense	$1,055
	Cash		$2,055
Jan 20	Accounts Payable	$1,760
	Cash		$1,760
Jan 22	Cash	$3,500
	Sales Discount ($3,500 x 3%)	$105
	Accounts Receivable		$3,500
Jan 24	Utilities Expense	$250
	Cash		$250
Jan 25	Accounts Payable	$880
	Cash		$880
Jan 28	Treasury Stock	$7,000
	Cash		$7,000
Jan 31	Salaries Expense	$686
	Accrued salaries Expense		$686
Jan 31	Depreciation Expense	$100
	Accumulated Depreciation—Equipment		$30
	Accumulated Depreciation—Furniture		$70
Jan 31	Rent Expense	$550
	Prepaid Rent		$550