Question

Sailor's Suits makes custom and wholesale Halloween costumes for pets. Prepare individual journal entries for each of the following transaction that occurred in September. For example, if you want to debit cash for $500 and credit sales revenue for $500 for transaction #1, type "1. Debit Cash 500; Credit Sales Revenue 500" in the answer box.

1. Sailor issues 10,000 shares of $5 par value common stock for $50,000 in cash.

2. Sailor acquires merchandise inventories with a list price of $15,000 on account from suppliers.

3. Sailor signs a contract with a customer for $5,000 of merchandise that she plans to deliver in the future. The customer advances $1,500 toward the contract price.

4. Sailor pays in cash wage expenses of $1,000 for hours works by her employees in September.

5. Sailor delivers the costumes to the customer from transaction (3). The customer pays, in cash, the remainder that she owed. The merchandise cost Sailor $2,750.

6. What is the amount of net income that Sailor will report on the Income Statement dated September 30? (do not prepare a journal entry for this question - simply type the amount of net income)

Answer 1

	Account title and explanation	Debit	Credit
1	Cash	$50,000
	Common stock		$50,000
	[To record issuance of common stock for cash]
2	Inventory	$15,000
	Accounts payable		$15,000
	[To record purchase of inventory on account]
3	Cash	$1,500
	Unearned revenue		$1,500
	[To record advance taken from customers]
4	Wages expense	$1,000
	Cash		$1,000
	[To record payment of wages]
5	Cash	$3,500
	Unearned revenue	$1,500
	Sales revenue		$5,000
	[To record sales revenue]

6.Net income = $5,000 revenue - $2,750 cost of goods sold - $1,000 wages expense = $1,250