Question

Project 1 2 Instructions: 4 Project 1 in eCampus requires you to record transactions, prepare the financial statements and answer questions based on these transactions. in theyellow cells, you are required to record the transactions in the accounting equation below and prepare thefinancial statements in the worksheet titled 'Statements" before entering your answers into eCampus This must beyour own work; working with others is considered academic dishonesty. Shareholder's Equity During April, its first month ofbusiness, Honest Tea, Inc. Liabilities Cosh Other Assets Cormmon Stock Retained Earnings Check Account Title Amount Account Title Account Title A-L+SE issued $15,000 of stock to its owners, Earl Grey and Ginger Green, in exchange for cash Received a $8,000, 6% cash loan from the bank on April 1 ; the interest and principal are dueJune 30 Paid $3,200 for 800 baes oftea it plans to sell 10 True 12 13 3 Purchased a display stand by paying $7,200 on April1 True Sold 300 bags oftea at a sales price of $15 each for cash; record thesleand thecost ofthe sale Paid $500 at the end of the month to its employee for services performed in April 1s 5 16 17 7 Declared and paid a $150 cash dividend to its shareholders 18 8 Adjusted for $100 of depreciation on its equipment True True Adjusted for the $40 of interest owed on the bank loan; the interest and principal will be paid on June 30 19 20 True

Answer 1

1	Issued $15000 of stock				Cash A/c	dr	15000
					To Shareholders Equity			15000
2	Received 8% cash Loan of $8000				Cash A/c	dr	8000
					To Cash Loan			8000
3	Paid 3200 for 800 tea bags				Purchase A/c	dr	3200
					To Cash			3200
4	Purchased Display Stand				Display Stand	dr	7200
					To Cash			7200
5	sold 300 bags of tea				Cash A/c	dr	4500
					To Sales			4500
					Cost of sales 3200/800*300	1200
					profit for the same	3300
6	Paid $500 to its employees				Salary A/c	dr	500
					To Cash			500
7	Cash Dividend				Dividend A/c	dr	150
					To cash			150
8	Depreciation				Depreciation	dr	100
					To Display Stand			100
		1 Issued $15000 of stock Cash A/c dr 15000 To Shareholders Equity 15000 2 Received 8% cash Loan of $8000 Cash A/c dr 8000 To Cash Loan 8000 3 Paid 3200 for 800 tea bags Purchase A/c dr 3200 To Cash 3200 4 Purchased Display Stand Display Stand dr 7200 To Cash 7200 5 sold 300 bags of tea Cash A/c dr 4500 To Sales 4500 Cost of sales 3200/800*300 1200 profit for the same 3300 6 Paid $500 to its employees Salary A/c dr 500 To Cash 500 7 Cash Dividend Dividend A/c dr 150 To cash 150 8 Depreciation Depreciation dr 100 To Display Stand 100 9 Interest Adjustment Interest dr 40 Note: Assumed to be not paid in cash To cash Loan 40 NET PROFIT = 4500-3200-500-40-100-150 510
9	Interest Adjustment				Interest	dr	40
	Note: Assumed to be not paid in cash				To cash Loan			40
		NET PROFIT		=	4500-3200-500-40-100-150	510

Asset			Liabilities		Shareholders Equity
Cash	Other Assets				Common Stock	Retained Earnings
	Amount	Account Title	Amount	Account Title		Amount	Account Title
16450	7100	Display Stand			15000	510	Profit
			8040	Cash Loan
16450	7100		8040		15000	510