Basic transactions: Periodic system, single cycle (Appendix)
The following events apply to Tops Gift Shop for 2012, its first year of operation:
1. Acquired $45,000 cash from the issue of common stock.
2. Issued common stock to Kayla Taylor, one of the owners, in exchange for merchandise inventory worth $2,500 Taylor had acquired prior to opening the shop.
3. Purchased $46,500 of inventory on account.
4. Paid $2,750 for advertising expense.
5. Sold inventory for $82,500.
6. Paid $8,000 in salary to a part-time salesperson.
7. Paid $30,000 on accounts payable (see Event 3).
8. Physically counted inventory, which indicated that $7,000 of inventory was on hand at the end of the accounting period.
Required
a. Record each of these events in general journal form. Tops Gift Shop uses the periodic system.
b. Post each of the events to ledger T-accounts.
c. Prepare an income statement, statement of changes in stockholders’ equity, balance sheet, and statement of cash flows for 2012.
d. Prepare the necessary closing entries at the end of 2012, and post them to the appropriate T-accounts.
e. Prepare a post-closing trial balance.
f. Discuss an advantage of using the periodic system instead of the perpetual system.
g. Why is the common stock issued on the statement of changes in stockholders’ equity different from the common stock issued in the cash flow from financing activities section of the cash flow statement?
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