Question

The transactions relating to the formation of Blue Co. Stores Inc., and its first month of operations follow. a. The firm was organized and the stockholders invested cash of $8,100. b. The firm borrowed $5,300 from the bank; a short-term note was signed. c. Display cases and other store equipment costing $1,700 were purchased for cash. The original list price of the equipment was $1,980, but a discount was received because the seller was having a sale. d. A store location was rented, and $1,300 was paid for the first month's rent. e. Inventory of $14,200 was purchased; $8,400 cash was paid to the suppliers, and the balance will be paid within 30 days. 1. During the first week of operations, merchandise that had cost $4,900 was sold for $5,700 cash. 9. A newspaper ad costing $110 was arranged for; it ran during the second week of the store's operations. The ad will be paid for in the next month. h. Additional inventory costing $4,250 was purchased; cash of $1,250 was pald, and the balance is due in 30 days. I. In the last three weeks of the first month, sales totaled $14.750, of which $9,600 was sold on account. The cost of the goods sold totaled $8,400. . Employee wages for the month totaled $1,900; these will be paid during the first week of the next month. k. The firm collected a total of $3,150 from the sales on account recorded in transaction i. IT firm paid a total of $4,800 of the amount owed to suppliers from transaction e. Required: a. Record each transaction in the appropriate columns. Indicate the financial statement effect. b. Calculate the total assets, liabilities, and stockholders' equity at the end of the month and calculate the amount of net income for the month. c. After completing parts a through I, prepare an income statement for Blue Co. Stores Inc. for the month presented and a balance sheet at the end of the month. Complete this question by entering your answers in the tabs below.

Answer 1

Answer-a.

Assets

=

Liabilities

+

Stockholders' Equity

Accounts

Merchandise

Notes

Accounts

Paid-in

Retained

Cash

+

Receivable

+

Inventory

+

Equipment

=

Payable

+

Payable

+

Capital

+

Earnings

Revenue

-

Expenses

a.

8,100

+

+

+

=

+

+

8,100

+

-

b.

5,300

+

+

+

=

5,300

+

+

+

-

c.

-1,700

+

+

+

1,700

=

+

+

+

-

d.

-1,300

+

+

+

=

+

+

+

-1,300

-

1,300

e.

-8,400

+

+

14,200

+

=

+

5,800

+

+

-

f.

5,700

+

+

-4,900

+

=

+

+

+

800

5,700

-

4,900

g.

+

+

+

=

+

110

+

+

-110

-

110

h.

-1250

+

+

4,250

+

=

+

3,000

+

+

-

i.

5,150

+

9,600

+

-8,400

+

=

+

+

+

6,350

14,750

-

8,400

j.

+

+

+

=

+

1900

+

+

-1900

-

1900

k.

3,150

+

-3,150

+

+

=

+

+

+

-

l.

-4,800

+

+

+

=

+

-4,800

+

+

-

Bal.

9,950

+

6,450

+

5,150

+

1,700

=

5,300

+

6,010

+

8,100

+

3,840

20,450

-

16,610

b-

Assets	23,250
Liabilities	11,310
Stockholders' Equity	8,100
Net Income	3,840

c-

BLUE CO. STORES, INC.
Income Statement
Sales revenue	20,450
Cost of goods sold	13,300
Gross margin	7,150
Rent expense	1,300
Wages expense	1,900
Advertising expense	110
Net income $	3,840

d-

BLUE CO. STORES, INC.
Balance Sheet
Assets:
Cash	9,950
Accounts receivable	6,450
Merchandise inventory	5,150
Total current assets	21,550
Equipment	1,700
Total assets	23,250
Liabilities:
Notes payable	5,300
Accounts payable	6,010
Total liabilities	11,310
Stockholders' Equity:
Common stock	8,100
Retained earnings	3,840
Total stockholders' equity	11,940
Total liabilities and stockholders' equity	23,250

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