Question

Use the horizontal model, or write the journal entry, for each of the following transactions and adjustments that occurred during the first year of operations at Kissick Co.

Issued 200,000 shares of $6-par-value common stock for $1,200,000 in cash.

Borrowed $550,000 from Oglesby National Bank and signed a 12% note due in two years.

Incurred and paid $430,000 in salaries for the year. Purchased $670,000 of merchandise inventory on account during the year.

Sold inventory costing $590,000 for a total of $950,000, all on credit.

Paid rent of $110,000 on the sales facilities during the first 11 months of the year.

Purchased $160,000 of store equipment, paying $52,000 in cash and agreeing to pay the difference within 90 days.

Paid the entire $108,000 owed for store equipment and $620,000 of the amount due to suppliers for credit purchases previously recorded.

Incurred and paid utilities expense of $37,000 during the year.

Collected $825,000 in cash from customers during the year for credit sales previously recorded.

At year-end, accrued $66,000 of interest on the note due to Oglesby National Bank.

At year-end, accrued $10,000 of past-due December rent on the sales facilities.

Required: Record each transaction in the appropriate columns. Indicate the financial statement effect.

Answer 1

Particulars	Debit	Credit
Cash	1200000
Common stock		1200000
( Being common stock issued)
Cash	550000
Notes payable		550000
( Being money borrowed in exchange of note payable)
Salaries expense	430000
Cash		430000
( Being salary paid)
Merchandise inventory	670000
Accounts payable-inventory		670000
( Being inventory puchased on credit)
Accounts Receivable	950000
Cost of goods sold	590000
Revenue		950000
Inventory		590000
( being invetory sold)
Rent expense	110000
Cash		110000
( Being rent paid)
Store equipment	160000
Cash		52000
Accounts payable-store equipment		108000
( being store equipment purchased)
Accounts payable-store equipment	108000
Cash		108000
( Being pending money paid)
Accounts payable-inventory	620000
Cash		620000
( Being pending money paid)
Utilities expense	37000
Cash		37000
(Being utility expenses paid)
Cash	825000
Accounts Receivable		825000
( Being amount collected from customers)
Interest Expense	66000
Accounts Payable- Interest on notes payable		66000
( Being interest expenses accrued)
Rent expense	10000
Accounts Payable- Rent expense		10000
( Being rent expense accrued)