Question

97 down and financed the holy 1. you purchased furniture payments on December Fluff Business, 2021, Year 3', you paid the amounts owed for Fluffs at the end of year 2020 and collected all of the amounts owed by customers at the end of last year. You purchased eleven more Fluffs for $4,000 each and at the same terms as last year. During the year you sold 11 Fluffs for $8,000 each at the same terms as last year. On January 1. you purchased furniture & fixtures for $45,000. You put $15,000 down and financed the balance at 10%. You will make annual payments on December 31" for three years of the interest plus $10.000 on the principal You estimate that you will use them for 10 years and then they will be worth $5,000. On June 30, you paid $4,800 for a two-year insurance policy. You paid your worker $8,000 and owed her $2,000 more at the end of the year. You also paid $13.000 for 13 months of rent. This year you declared and paid a dividend of $5,000 to your shareholders. On October 1" you issued 10 shares of common stock for $3,000. On December 31". you paid the first payment on the furniture & fixtures loan. Also on December 31, you paid Mike his interest. You paid the taxes owed at the end of last year. The tax rate is 30%. This year's taxes will be paid next year. You use the FIFO inventory system. Prepare Journal Entries, T-accounts, an Income Statement, a Statement of Owners' Equity and a Balance Sheet. 31,950 Account receivable Inventory 33,600 18,000 40,000 2,000 33,750 u Busine 9020 Seuerity depost Accoint payable wage payable Taxes payable Note Payable Lommen Stou hetained Earnings 10,000 72,000 6,700 125,550 125,550,

Answer 1

Journal entries for 2021 S No Particulars Debit Credit 1 33,750 33,750 Accounts Payable To Cash (Being amount paid for 2020 outstanding) 2 1,000 1,000 Wages Payable To Cash (Being amount paid for 2020 outstanding) 3 10,000 10,000 Note Payable To Cash (Being amount paid for 2020 outstanding) 4 33,600 33,600 Cash To Accounts Receivable (Being amount received for 2020 outstanding)

44,000 44,000 Inventory To Cash (Being 11 fluffs purchased @ 4000 each) 88,000 88,000 Cash To Sales (Being sale of 11 fluffs @ $8000 assuming cash sales) 44,000 44,000 Cost of goods sold To Inventory (Being cost of 11 fluffs tranferred to cost of goods sold) 45,000 Furniture & Fixtures To Cash To Loan (Being Furniture & Fixtures purchased) 15,000 30,000

4,000 (45000 - 5000/10 years 4,000 Depreciation To Accumulated Depreciation (Being depreciation on Furniture & Fixtures assuming straight line depreciation) 9 4,800 4,800 Prepaid Insurance To Cash (Being 2 year insurance paid on 30th June) 10 1,200 (4800/24 months *6 months) 1,200 Insurance expense To Prepaid Insurance (Being insurance expensed off for 6 months from Jul - Dec 2021) 11 10,000 Wages & Salary To Cash To Wages Payable (Being wages for 2021) 8,000 2,000

13,000 Prepaid Rent To Cash (Being 13 months rent paid) 13,000 13 12,000 12,000 Rent expense To Prepaid Rent (Being rent expensed for Jan - Dec 2021) 14 5,000 Retained Earnings To Cash (Being dividend paid) 5,000 15 3,000 Cash To Common stock (Being 10 shares issued) 3,000 16 10,000 3,000 Loan Interest expense To Cash (Being first installment of Furniture and fixtures loan) 13,000 (10000 * 10%)

17 2,100 2,100 Taxes Payable To Cash (Being amount paid for 2020 outstanding) 18 9,660 Refer Income Statement Tax expense To Taxes payable 9,660

T accounts Particulars To Opening Balance To Accounts Receivable To Common stock To Sales Cash Account Amount Particulars 31,950 By Accounts Payable 33,600 By Wages Payable 3,000 By Note Payable 88,000 By Inventory By Furniture & Fixtures By Prepaid Insurance By Wages & Salary By Prepaid Rent By Retained Earnings By Loan By Interest expense By Taxes Payable By Closing Balance | 156,550 Amount 33,750 1,000 10,000 44,000 15,000 4,800 8,000 13,000 5,000 10,000 3,000 2,100 6,900 156,550 Particulars To cash Accounts payable Amount Particulars 33,750 By opening balance 33,750 Amount 33,750 33,750

Particulars To cash To Closing Balance Wages payable Amount Particulars 1,000 By opening balance 2,000 By Wages & Salary 3,000 Amount 1,000 2,000 3,000 Particulars To cash Notes payable Amount Particulars 10,000 By opening balance 10,000 Amount 10,000 10,000 Particulars To Opening Balance Accounts Recievable Amount Particulars 33,600 By Cash 33,600 Amount 33,600 33,600 Particulars To Opening Balance To Cash Inventory Amount Particulars 18,000 By Cost of goods sold 44,000 By Closing Balance 62,000 Amount 44,000 18,000 62,000

Amount Particulars To Cash To Loan Furniture & Fixtures Amount Particulars 15,000 30,000 By Closing Balance 45,000 45,000 45,000 Amount Particulars To Cash To Closing Balance Loan account Amount Particulars 10,000 By Furniture & Fixtures 20,000 30,000 30,000 30,000 Particulars To Closing Balance Accumulated Depreciaton Amount Particulars 4,000 By Depreciation Amount 4,000 4,000 4,000 Amount Particulars To Cash Prepaid Insurance Amount Particulars 4,800 By Insurance expense By Closing Balance 4,800 1,200 3,600 4,800

Particulars To Cash Prepaid Rent Amount Particulars 13,000 By rent expense By Closing Balance 13,000 Amount 12,000 1,000 13,000 Particulars To Closing balance Common stock Amount Particulars 75,000 By Opening Balance By Cash 75,000 Amount 72,000 3,000 75,000 Particulars To Cash To Closing Balance Taxes Payable Amount Particulars 2,100 By Opening Balance 4,140 By Tax expense 6,240 Amount 2,100 4,140 6,240

Particulars To Cash (Dividend) Amount 6,700 Retained Earnings Amount Particulars 5,000 By Opening Balance By Income Satement(Income after 11,360 tax) 16,360 To Closing Balance 9,660 16,360 Income Statement 88,000 Sales Less: Expenses Cost of Goods sold Depreciation Insurance expense Wages & Salary Rent expense Interest expense Income before tax Less Tax @ 30% Income after Tax 44,000 4,000 1,200 10,000 12,000 3,000 74,200 13,800 4,140 9,660

Statement of Owner's Equity Common Stock Retained Earnings Owner's Equity 75,000 11,360 86,360 Amount Balance Sheet Assets Cash Inventory Prepaid Insurance Prepaid Rent Furniture & Fixtures Less: Accumulated Depreciation Land Security Deposit Total Assets 6,900 18,000 3,600 1,000 45,000 (4,000) 41,000 40,000 2,000 112,500

Liabilities & Equity Liabilities Wages Payable Loan Taxes Payable Equity Common stock Reatined Earnings Total Liabilities & Equity 2,000 20,000 4,140 26,140 75,000 11,360 86,360 112,500