Question

Trans. Description Date Borrow $115,000 from the local bank and signed a six-year installment note with payments of $1,905 at the end of each month. The annual interest rate is 6%. Current portion of Note at year end after December payment = 16,500 Purchased a building for $56,000. Paid $2,000 in attorney fees, $4,000 in remodeling costs to get the building ready for use. The building has a 25- year useful life with residual value of $2,000 Sold $4,350 worth of gift cards in opening celebration for services to be provided in December. The gift cards expire at the end of the month Sell 16,000 shares of no-par value common stock for $6 per share to obtain the funds necessary to start your business. 1 Dec. 1 2 Dec. 1 3 Dec. 1 4 Dec. 1 5 Dec. 1 Purchase 400 units of inventory on account with terms 3/10 net 30. Purchase a vehicle necessary for business operations for $21,000 cash. The vehicle has a five year life with a residual value of $3,000. Pay $6,000 for one year of insurance in advance. 6 Dec. 1 7 Dec. 1 Sell 200 units of inventory to a customer who signs a 6-month promissory note at 6% with interest and principal due at maturity. perpetual method 2 entries 8 Dec. 3 Purchase Supplies on account, $3,200. 9 Dec. 3 Provide 40 hours of services to customers who pay with gift cards (calculate using your hourly service rate) no terms specified. Company pays invoice for inventory purchased on December 1t within discount terms. Dec. 6 10 Dec. 8 11 12. Dec. 10 Purchase an additional 240 units of inventory for cash. Sell 100 units of inventory to a customer on account with a sales discount of 2/10, n/30. (Perpetual method- 2 entries) The customer who purchased product on December 12th pays the amount due (within discount period). Sell 180 units of inventory on account. (Perpetual method = 2 entries) Record the of $1,905 installment payment on the $115,000 installment note borrowed on December 1st. The annual interest rate is 6%. 13 Dec. 12 Dec. 20 14 15 Dec. 23 16 Dec. 31 Pay employee salaries, $4,000. 17 Dec. 31 18 Dec. 31 Pay cash dividends to shareholders of $0.10 per share. Vehicle did not meet expectations sold to another company for $23,000. (Record depreciation at date of sale and then record sale). 19 Dec. 31

record the following transactions on a general journal.

Given:

-customers are charged $87 per hour for services rendered

-customers are charged $75 for each unit

purchased

-inventory can be purchased for $36 per unit

Answer 1

Transaction	Date	Account	Debit	Credit
1	Dec. 1	Cash	115000
		Notes payable		115000
2	Dec. 1	Building	62000
		Cash		62000
3	Dec. 1	Cash	4350
		Unearned revenue		4350
4	Dec. 1	Cash (16000 x $6)	96000
		Common stock		96000
5	Dec. 1	Inventory (400 x $36)	14400
		Accounts payable		14400
6	Dec. 1	Vehicle	21000
		Cash		21000
7	Dec. 1	Prepaid insurance	6000
		Cash		6000
8	Dec. 3	Notes receivable	15000
		Sales revenue (200 x $75)		15000
	Dec. 3	Cost of goods sold	7200
		Inventory (200 x $36)		7200
9	Dec. 3	Supplies	3200
		Accounts payable		3200
10	Dec. 6	Unearned revenue	3480
		Service revenue (40 x $87)		3480
11	Dec. 8	Accounts payable	14400
		Inventory ($14400 x 3%)		432
		Cash		13968
12	Dec. 10	Inventory (240 x $36)	8640
		Cash		8640
13	Dec. 12	Accounts receivable	7500
		Sales revenue (100 x $75)		7500
	Dec. 12	Cost of goods sold	3384
		Inventory		3384
14	Dec. 20	Cash	7350
		Sales discount ($7500 x 2%)	150
		Accounts receivable		7500
15	Dec. 23	Accounts receivable	13500
		Sales revenue (180 x $75)		13500
	Dec. 23	Cost of goods sold	3384
		Inventory		3384
16	Dec. 31	Notes payable	1330
		Interest expense ($115000 x 6% x 1/12)	575
		Cash		1905
17	Dec. 31	Salaries expense	4000
		Cash		4000
18	Dec. 31	Dividends (16000 x $0.10)	1600
		Cash		1600
19	Dec. 31	Depreciation expense [($21000 - $3000) x 1/60]	300
		Accumulated depreciation-vehicle		300
		Cash	23000
		Accumulated depreciation-vehicle	300
		Gain on disposal		2300
		Vehicle		21000

Working:

Perpetual-FIFO
	Purchased			Cost of Goods Sold			Balance in Inventory
Date	Units	Unit cost	Total $	Units	Unit cost	Total $	Units	Unit cost	Total $
Dec. 1	400	36	14400				400	36	14400
Dec. 3				200	36	7200	200	36	7200
Dec. 8			-432				200	33.84	6768
Dec. 10	240	36	8640				200	33.84	6768
							240	36	8640
Dec. 12				100	33.84	3384	100	33.84	3384
							240	36	8640
Dec. 23				100	33.84	3384	240	36	8640

Note: The FIFO method has been followed under perpetual inventory as the same has not been specified in the question. The cost of goods sold would vary in case LIFO or weighted-average method is to be used.