Question

Required Prepare the necessary journal entries for Drake Company. SERIAL PROBLEM: KATE'S CARDS (Note: This is a continuation of the Serial Problem: Kate's Cards from Chapters / through 4.) Sps Kate was a little worried about some of the practices of Fred Abbott, the CEO of Sentimente cided that an association with Sentiments could damage the reputation of her own company. Ka concerned that her business be viewed as socially responsible and any damage to her reputatie early stage could prove very difficult to overcome. She therefore decided to concentrate her producing a quality product that consumers would be proud to purchase and send to their love As expected, November saw a boom in Kate's greeting card business. She invested in add computer graphics equipment, which she partially funded with a bank loan of $15,000 and an addi: investment of her own funds into the business. The loan carries an interest rate of six perce interest payments required semiannually. The entire principal balance is due in one balloon in two years. Kate uses a perpetual inventory system. As of December 2, 2018, Kate's Cards ha following account balances: Sentiments, and de- pany. Kate is very er reputation at this ntrate her efforts on to their loved ones. sted in additional Cash........ Accounts receivable....... Inventory Other current assets. ..... Computer equipment ....... $11,900 16,800 16,000 3,600 38,900 ... $ 1,600 13,800 Accumulated depreciation. Accounts payable........ Other current liabilities ..... Long-term note payable .... Common stock . . . . . ... Retained earnings .......... 900 15,000 25,000 30,900 The company had the following transactions during December 2018: Dec 1 Paid $1,200 rent for the month. 7 Paid $1,800 to employees. Of this amount, $900 was for an amount owed from November. Wages due to employees at the end of each month are recorded as Other Current Liabilities. 9 Received $5,400 from customers as payment on account. 12 Sold, for cash, $11,000 of greeting cards. This merchandise had cost $6,000 to produce. 14 Purchased additional inventory totaling $7,000 on account with terms of 2/10, n/45. 15 Paid cash for supplies (listed as Other Current Assets) in the amount of $600. 19 Sold, on account with terms of 2/10, n/30, greeting cards totaling $6,000. The merchandise had cost $4,000 to produce. 21 Paid additional wages of $1,400. 25 Paid the total owed for the merchandise that was purchased on December 14. 28 Received payment in full from the customer that purchased the merchandise on December 31 Depreciation for the month totaled $900. 31 A physical count of inventory and supplies revealed that $13,000 and $2,000, respectively, were on hand at year-end. Assume that Other Current Assets consists only of the cost o supplies.

Answer 1

a.

Date	General Journal	Debit	Credit
Dec. 1	Rent expense	1200
	Cash		1200
	(To record rent paid for the month)
7	Other current liabilities	900
	Wages expense	900
	Cash		1800
	(To record wages paid to employees)
9	Cash	5400
	Accounts receivable		5400
	(To record collections on account)
12	Cash	11000
	Sales revenue		11000
	(To record cash sales)
12	Cost of goods sold	6000
	Inventory		6000
	(To record the cost of goods sold)
14	Inventory	7000
	Accounts payable		7000
	(To record inventory purchased on account)
15	Other current assets	600
	Cash		600
	(To record cash paid for supplies)
19	Accounts receivable	6000
	Sales revenue		6000
	(To record sales on account)
19	Cost of goods sold	4000
	Inventory		4000
	(To record the cost of goods sold)
21	Wages expense	1400
	Cash		1400
	(To record additional wages paid)
25	Accounts payable	7000
	Cash		7000
	(To record payment on account)
28	Cash	5880
	Sales discount (2% x $6000)	120
	Accounts receivable		6000
	(To record collections on account)
31	Depreciation expense	900
	Accumulated depreciation		900
	(To record depreciation for the month)
31	Supplies expense	2200
	Other current assets ($3600 + $600 - $2000)		2200
	(To record supplies used during the month)

Note: No journal entry is required for the physical count of inventory on hand since the book inventory matches the physical count.

b.

KATE'S CARDS
Income Statement
For the Month Ended December 31, 2018
Sales revenue	17000
Less: Sales discount	120
Net sales revenue		16880
Cost of goods sold		10000
Gross profit		6880
Less: Operating expenses
Rent expense	1200
Wages expense ($900 + $1400)	2300
Depreciation expense	900
Supplies expense	2200
Total operating expenses		6600
Net income $		280

c. Gross profit percentage = Gross profit/Net sales revenue = $6880/$16880 = 40.76%

Return on sales ratio = Net income/Net sales revenue = $280/$16880 = 1.66%

Kindly round off the percentage answers as required since no instructions have been provided with the question regarding rounding off.