Question

Three former college classmates decided to open a store near campus to sell wireless equipment to students. They created a public company, The Wire, and issued stock to interested investors. They plan on creating monthly financial statements.

Required: Several transactions occurred in March. Each is described separately in this folder. For each transaction, indicate the accounts for The Wire that are affected, whether they increase or decrease, and the amount of the increase or decrease.

YOU MUST FOLLOW THE INSTRUCTIONS BELOW. IF YOU DON'T, YOU MAY KNOW THE CORRECT ENTRY BUT THE COMPUTER WILL NOT RECOGNIZE IT AND WILL NOT GIVE YOU CREDIT.

After each transaction description, there are several "Account" submission boxes and corresponding "Amount" submission boxes. To indicate the accounts that you think are affected, choose them from the drop-down menu. But you MUST select them in the order that they are listed in the menu. FOR EXAMPLE, if you think that Cash and Inventory are affected by a particular transaction, you must record the effect on the Cash account first and the effect on the Inventory account second, since that is the order in which they are listed in the drop-down menu. If you record the Inventory effect first and the Cash effect second, even if they are the correct accounts with the correct dollar amounts, your answer will be considered wrong.

When you record the dollar amounts, be sure to use a minus sign to indicate a decrease in the account. You don't need to use a plus sign to indicate an increase. Also, don't use a dollar sign or spaces.

There are always more "Account" and "Amount" submission boxes available than are necessary. When you have indicated all the accounts that are affected by the transaction, select "Leave Blank" from the drop-down menu for EACH of the remaining "Account" submission boxes (you can leave the "Amount" boxes blank).

For transactions 3, 4, 5, and 8, you are given additional instructions. Read them carefully.

You get 5 tries for each complete entry.

The entries for transaction #8 is worth 4 points. The entries for each of the other transactions are worth 2 points.

Transaction 3
A one-year store rental lease was signed on March 1 for $1,000 per month, and rent for the first 4 months was paid in advance. [Note: Record the complete entry for the March 1 transaction first and the complete adjusting entry on March 31 second.]

For Accounts : Cash Accounts Receivable Inventory Prepaid Rent Fixtures and Equipment Accounts Payable Interest Payable Wages Payable Notes Payable Paid-in Capital Retained Earnings Leave Blank

Account:   Dollar amount:

Account:   Dollar amount:  

Account:   Dollar amount:   

Account:   Dollar amount:   

Account:   Dollar amount:   

Transaction 5
Sales were $68,000. Merchandise was sold for 2 times its purchase cost. 80% of the sales were on open account. [Note: Record the complete entry for the sales first and the complete entry for the expenses second]

For Accounts : Cash Accounts Receivable Inventory Prepaid Rent Fixtures and Equipment Accounts Payable Interest Payable Wages Payable Notes Payable Paid-in Capital Retained Earnings Leave Blank

Account:   Dollar amount:

Account:   Dollar amount:   

Account:   Dollar amount:   

Account: Dollar amount:

Account:   Dollar amount:  

Account:   Dollar amount:   

Transaction 7

Miscellaneous expenses were $1,100, all paid for with cash.

For Accounts : Cash Accounts Receivable Inventory Prepaid Rent Fixtures and Equipment Accounts Payable Interest Payable Wages Payable Notes Payable Paid-in Capital Retained Earnings Leave Blank

Account:   Dollar amount:

Account: Dollar amount:

Account:   Dollar amount:

Account:   Dollar amount:   

Transaction 8
On March 1, fixtures and equipment were purchased for $5,000 with a downpayment of $1,500 and a $3,500 note, payable in one year. Interest of 4% per year was due when the note was repaid. The estimated life of the fixtures and equipment is 11 years with no expected salvage value. [Note: Record the complete entry for the March 1 equipment purchase first, the March 31 depreciation adjusting entry second, and the March 31 interest adjusting entry third. Also, round all answers to the nearest cent.]

For Accounts : Cash Accounts Receivable Inventory Prepaid Rent Fixtures and Equipment Accounts Payable Interest Payable Wages Payable Notes Payable Paid-in Capital Retained Earnings Leave Blank

Account: Dollar amount:   

Account: Dollar amount:

Account: Dollar amount:   

Account:   Dollar amount:   

Account: Dollar amount:  

Account: Dollar amount:   

Account: Dollar amount:   

Account: Dollar amount:   

Answer 1

3
Account	Dollar amount
Cash	-4000
Prepaid rent	4000
Prepaid rent	-1000
Retained earnings	-1000
5
Account	Dollar amount
Cash	13600
Accounts Receivable	54400	=68000*80%
Retained earnings	68000
Inventory	-34000	=68000*50%
Retained earnings	-34000
7
Account	Dollar amount
Cash	-1100
Retained earnings	-1100
8
Account	Dollar amount
Cash	-1500
Fixtures and Equipment	5000
Notes Payable	3500
Fixtures and Equipment	-37.88	=-5000/11/12
Retained earnings	-37.88
Interest Payable	11.67	=3500*4%/12
Retained earnings	-11.67