Question

The following transactions occurred in a merchandising business that was incorporated in the month of October The numbers beside the transactions represent the day of the month the transaction occurred. The company is using a sales price per unit of S10. Assume the company uses FIFO as its cost flow assumption. There are no discounts (for sales or purchases) in this problem 1. JOURNAL ENTRIES: Prepare an appropriate journal entry for each of the following transactions 1 The organization issued 2,000 shares of $10 par value common stock, they received $40,000 in cash 1 Purchased 300 units of inventory on account, $3.50 per unit. 1Paid cash to overnight ship the inventory, $450 total. 2 Purchased a building with land for the business with a Periodic Payment Note, 20 year, 6%. In addition to the purchase price of $150,000, renovations to the building were included in the Note amount, the renovation cost 25,000. The land and building were independently appraised at S50,000 and $150,000, respectively. 2 Paid cash for the on account purchase of inventory (300 units on 10/1) 2 Office supplies were purchased from Office Supply Store on account - S550 3Purchased 150 units of inventory on account, $3.50 per unit. 3Paid cash to ship inventory (3-day shipping), $150 total. 3Sold 320 products to customers on account, sales price of $10 per unit. (Determine the cost of products based on inventory purchases and any related transactions) Office furniture was purchased with a 2 year Periodic Interest-Lump Sum Principle Note, 12% annual interest, payable semi-annually - $5,750 4 5 Sold 75 products to customers for cash. 5 Purchased 250 units of inventory on account, negotiated a quantity discount $3.25. 5 Paid cash to ship inventory (3-day shipping), $250. 6 Paid off all inventory account purchases (150 units on 10/3 & 250 units on 10/5) 7 Received cash for previous sale on account (320 units on 10/3) 7Sold 120 products to customers on account. 9 Sold 100 products to a customer for cash. 15 Received cash for previous sale on account (120 units on 10/7) 15 Paid employees with cash, Gross-$2.100. Federal and State withholdings, 15% and 5%, respectively. FICA 7.65%. Employer payroll taxes include FUTA-.8%, SUTA-5.490, FICA match-7.65% Purchased 350 units of inventory on account, negotiated a quantity discount - $3.40 Paid cash to ship inventory (5-day), $175. Sold 220 products to a customer on account Paid Office Supply Store (10/2) - S550 Sold 100 products to a customer for cash Sold 50 products to a customer on account. Paid employees with cash, Gross-$2,100. Federal and State withholdings, 15% and 5%, respectively. FICA 7.65%. Employer payroll taxes include FUTA-.8%, SUTA-5.4%, FICA match-7.65% 16 20 26 28 29 30

Answer 1

Date Account Title & Explanation Debit Credit 1 Cash Common Stock (2000*10) Additional Paid In Capital (To record issue of shares) 1 Merchandise Inventory Accounts Payable 0 1050 3.5 1050 1050 2 To record purchase of inventory on account) 1 Freight Charges 5 Cash To record payment of shipping charges) 8 2 Land Building Notes Payable 0 1 2 To record purchase of land & Building) 2 Accounts Payable 1050 4 Cash 1050 5 (to record payment of accounts payable)

27 28 29 30 31 32 2 Office Supplies 550 Accounts Payable To record purchase of supplies) 300 150 525 525 3 Merchandise Inventory 3.5 3.5 525 Accounts Payable 525 35 36 37 38 39 To record purchase of inventory on account) Freight Charges (To record payment of shipping charges) 150 Cash 150 3 Accounts Receivable 3200 Sales Revenue (320*10) 3200 41 To record sale of Inventory) Cost of Goods Sold (1050+70) (To record cost of Inventory) Office Furniture To record purchase of furniture) 3.5 3.5 3.5 3.5 3.5 1050 525 1050 70 455 150 43 Merchandise Inventory 1120 20 130 45 47 48 49 5750 Notes Payable 5750

5 Cash 51 52 53 54 Sales Revenue (75 10) To record sale of Inventory) 3.5 3.5 2 3.5 192.5 130 Cost of Goods Sold 262.5 262.5 Merchandise Inventory 262.5 57 To record cost of Inventory) 59 5 Merchandise Inventory Accounts Payable 3.5 3.25 812.5 192.5 812.5 812.5 To record purchase of inventory on account) 61 62 63 64 65 5 Freight Charges Cash To record payment of shipping charges) 67 6 Accounts Payable (525+812.5) 1337.5 Cash 1337.5 69 (to record payment of accounts payable) 70 71 72 73 7 Cash 3200 Accounts Receivable 3200 To record receipt of money)

75 7 Accounts Receivable 1200 Sales Revenue (120*10) 1200 To record sale of Inventory) Cost of Goods Sold (192.5+211.25) To record cost of Inventory) 3.5 192.5 812.5 192.5 3.25 211.25 3.25 601.25 3.25 3.5 403.75 250 Merchandise Inventory 403.75 65 32 185 9 Cash 1000 Sales Revenue (100*10) 1000 35 To record sale of Inventory) 36 185 3.25 601.25 3.25 25 211.25 Cost of Goods Sold 390 -120 390 38 Merchandise Inventory 390 To record cost of Inventory) 0 15 Cash 1200 Accounts Receivable 1200 To record receipt of money)

15 Salaries Expense 95 96 97 98 2100 Federal Taxes Payable (2100*15%) State Taxes Payable (2100*596) FICA Payable (2100*7.65%) Cash 315 105 160.65 1519.35 100 101 102 103 104 105 106 107 108 109 110 To record salaries) Employer Payroll Taxes 290.85 FICA Payable (2100*7.65%) FUTA Payable (2100*.896) SUTA Payable (2100*5.4%) 160.65 16.8 113.4 16 Merchandise Inventory Accounts Payable 1190 65 3.25 211.25 1190 350 1190 To record purchase of inventory on account) Freight Charges To record payment of shipping charges) 175 175 112 113 114 115 116 Cash 20 Accounts Receivable 2200 Sales Revenue (22010) 2200 To record sale of Inventory

Cost of Goods Sold (527+211.25) 738.25 350 3.4 1190 3.25 211.25 527 119 Merchandise Inventory 738.25 121 122 123 124 125 126 127 128 129 130 131 132 133 To record cost of Inventory) 155 3.4 195 3.4 26 Accounts Payable Cash (to record payment of accounts payable) 28 Cash 1000 Sales Revenue (100*10) 1000 To record sale of Inventory) Cost of Goods Sold 3.4 3.4 3.4 195 Merchandise Inventory 100 340 (To record cost of Inventory) 323 29 Accounts Receivable 135 136 137 138 139 140 141 142 Sales Revenue (5010) (To record sale of Inventory) Cost of Goods Sold 170 3.4 3.4 3.4 323 170 153 Merchandise Inventory 170 50 To record cost of Inventory)

30 Salaries Expense 2100 Federal Taxes Payable (2100*15%) State Taxes Payable (2100*596) FICA Payable (2100*7.65%) Cash 315 105 160.65 1519.35 14 15 17 18 To record salaries 50 Employer Payroll Taxes 290.85 FICA Payable (2100*7.65%) FUTA Payable 2100*.896) SUTA Payable (2100*5.4%) 160.65 16.8 113.4 2 Adjusting Journal Entries 7 Date Account Title & Explanation Debit Credit 1 Retained Earnings 6000 59 Dividend Payable (3*2000) 6000 To record declaration of dividend) 2 Depreciation Expense Building 389 Accumulated Depreciation (150000-10000)/360 389 To record depreciation)

875 174.21 3 Interest expense Principal Cash 1049.21 To record payment of first periodic payment) 4 Supplies Expense (550-150) 400 Supplies 400 To record supplies consumed) 5 Depreciation Expense Office Furniture Accumulated Depreciation 192 (100%/5)*2-40% * 5750 *1/12 192 To record depreciation) 6 Interest Expense 57.5 Interest Payable To record interest due 57.5 7 Bad Debts Expense 150 Allowance for Doubtful Accounts 150 (To record bad Debts)