Question

Exercise 4-5 (Static) Record transactions and calculate financial statement amounts LO 2, 6, 7 The transactions relating to the formation of Blue Co. Stores Inc., and its first month of operations follow. a. The firm was organized and the stockholders invested cash of $16,000. b. The firm borrowed $10,000 from the bank, a short-term note was signed. c. Display cases and other store equipment costing $3,500 were purchased for cash. The original list price of the equipment was $3,800, but a discount was received because the seller was having a sale. d. A store location was rented, and $2,800 was pald for the first month's rent e. Inventory of $30,000 was purchased: $18,000 cash was paid to the suppliers, and the balance will be paid within 30 days. t. During the first week of operations, merchandise that had cost $8,000 was sold for $13,000 cash. 9. A newspaper ad costing $200 was arranged for, it ran during the second week of the store's operations. The ad will be paid for in the next month h. Additional Inventory costing $8,400 was purchased cash of $2,400 was paid, and the balance is due in 30 days. 1. In the last three weeks of the first month, sales totaled $27,000, of which $19,200 was sold on account. The cost of the goods sold totaled $18,000 J. Employee wages for the month totaled $3,700; these will be paid during the first week of the next month. k. The firm collected a total of $6,320 from the sales on account recorded in transaction 1. The firm paid a total of $9.440 of the amount owed to suppliers from transactione Required: a. Record each transaction in the appropriate columns. Indicate the financial statement effect. b. Calculate the total assets, liabilities, and stockholders' equity at the end of the month and calculate the amount of net income for the month c. After completing parts a through I, prepare an income statement for Blue Co. Stores Inc. for the month presented and a balance sheet at the end of the month Complete this question by entering your answers in the tabs below.

Answer 1

a e Transactions Cash 16,000.00 b 10,000.00 С -3,500.00 d -2,800.00 -18,000.00 f 13,000.00 g h -2,400.00 i 7,800.00 j k 6,320.00 1 -9,440.00 Balance 16,980.00 ASSETS LIABILITIES STOCKHOLDERS' EQUITY Accounts Receivable Merchandise Inventory Equipment = Notes Payable Accounts Payable Paid In Capital Retained Earnings Revenue Expenses 16,000.00 10,000.00 3,500.00 = -2,800.00 30,000.00 12,000.00 -8,000.00 13,000.00 -8,000.00 200.00 -200.00 8,400.00 6,000.00 19,200.00 -18,000.00 27,000.00 -18,000.00 3,700.00 -3,700.00 -6,320.00 -9,440.00 12,880.00 12,400.00 3,500.00 = 10,000.00 12,460.00 16,000.00 40,000.00 -32,700.00

BLUE CO.STORES INC Income Statement Effect Particulars Amount ($) Amount ($) Sales Revenue 40,000.00 Less :- Expenses Cost of goods sold -26,000.00 Advertising Expense -200.00 Rent Expense -2,800.00 Wages Expense -3,700.00 -32,700.00 Particulars Assets Liabilities Stockholders' Equity Net Income Amount ($) 45,760.00 22,460.00 16,000.00 7,300.00 Balance Sheet BLUE CO.STORES INC Current Asset Amount ($) Amount ($) Cash 16,980.00 Accounts Receivable 12,880.00 Merchandise Inventory 12,400.00 Total Current Assets 42,260.00 Equipment 3,500.00 3,500.00 Total Assets 45,760.00 Net Income 7,300.00 10,000.00 12,460.00 Current Liabilities Notes Payable Accounts Payable Total Liabilities Owners Equity Paid In Capital Retained Earnings 22,460.00 16,000.00 7,300.00 23,300.00 Total Liabilities & Equity 45,760.00