Question & Answer: Hello, looking for the solutions for this Trial balance & income statement problem……

Hello, looking for the solutions for this Trial balance & income statement problem.

Robert Kapela owned and managed a franchise of Ithaca Espresso, Incorporated. The comapny’s balance sheet accounts had the following balances on September 1, 20X0, the beginning of a fiscal year:

Ithaca Espresso Balance Sheet Accounts, September 1, 20X0 Cash Accounts receivable Merchandise inventory Prepaid rent Store equipment Accumulated depreciation, store equipment Accounts payable Paid-in capital Retained earnings 13.000 5.200 77.800 4.000 21,000 $6.150 40,000 30,000 44.850 $121.000 $121.0OO

Summarized transactions for September were as follows:

a. Acquisitions of merchandise inventory on account, $41,000

b. Sales for cash $74, 250

c. Payments to creditors, $29,000

d. Sales on account $3,000

e. Advertising in newspapers, paid in cash $3,000

f. Cost of goods sold, $45,000

g. Collections on account $6,000

h. Miscellaneous expenses paid in cash $8,000

i. Wages paid in cashe, $9,000

j .Entry for rent expense. (Rent was paid quarterly in advance, $6,000 per quarter. Payments were due on February 1, May 1, August 1 and November 1.)

k. Depreciation of Store Equipment $250

Also Required

1. Enter the September 1 balances in T-accounts in a general ledger.

2. Prepare journal entries for each transaction.

3. Post the journal entries to the ledger. Key your postings by transaction letter.

4. Prepare an income statement for September and a balance sheet as of September 30, 20X0.

Show transcribed image textIthaca Espresso Balance Sheet Accounts, September 1, 20X0 Cash Accounts receivable Merchandise inventory Prepaid rent Store equipment Accumulated depreciation, store equipment Accounts payable Paid-in capital Retained earnings 13.000 5.200 77.800 4.000 21,000 $6.150 40,000 30,000 44.850 $121.000 $121.0OO

Journal entries

Transaction	Account Titles and Explanation	Debit	Credit
a.	Merchandise inventory	41000
	Accounts payable		41000
	(To record purchase of inventory on account)
b.	Cash	74250
	Sales revenue		74250
	(To record cash sales)
c.	Accounts payable	29000
	Cash		29000
	(To record payments to creditors)
d.	Accounts receivable	3000
	Sales revenue		3000
	(To record sales on account)
e.	Advertising expense	3000
	Cash		3000
	(To record advertising expense paid)
f.	Cost of goods sold	45000
	Merchandise inventory		45000
	(To record cost of goods sold)
g.	Cash	6000
	Accounts receivable		6000
	(To record collections on account)
h.	Miscellaneous expenses	8000
	Cash		8000
	(To record miscellaneous expense paid)
i.	Wages expense	9000
	Cash		9000
	(To record wage expense paid)
j.	Rent expense	2000
	Prepaid rent		2000
	(To record rent expense)
k.	Depreciation expense	250
	Accumulated depreciation, store equipment		250
	(To record depreciation expense)

T-accounts

Cash				Accounts Receivable
	Debit	Credit			Debit	Credit
Beg. Bal.	13000	29000	c.	Beg. Bal.	5200	6000	g.
b.	74250	3000	e.	d.	3000
g.	6000	8000	h.	End. Bal.	2200
		9000	i.
End. Bal.	44250

Merchandise Inventory				Prepaid Rent
	Debit	Credit			Debit	Credit
Beg. Bal.	77800	45000	f.	Beg. Bal.	4000	2000	j.
a.	41000			End. Bal.	2000
End. Bal.	73800

Store Equipment				Accumulated Depreciation, Store Equipment
	Debit	Credit			Debit	Credit
Beg. Bal.	21000					6150	Beg. Bal.
End. Bal.	21000					250	k.
						6400	End. Bal.

Accounts Payable				Paid-in Capital
	Debit	Credit			Debit	Credit
c.	29000	40000	Beg. Bal.			30000	Beg. Bal.
		41000	a.			30000	End. Bal.
		52000	End. Bal.

Retained Earnings				Sales Revenue
	Debit	Credit			Debit	Credit
		44850	Beg. Bal.			74250	b.
		10000	Net income			3000	d.
		54850	End. Bal.

Cost of Goods Sold				Advertising Expense
	Debit	Credit			Debit	Credit
f.	45000			e.	3000

Depreciation Expense				Rent Expense
	Debit	Credit			Debit	Credit
k.	250			j.	2000

Wages Expense				Miscellaneous Expense
	Debit	Credit			Debit	Credit
i.	9000			h.	8000

Income Statement

ITHACA ESPRESSO
Income Statement
For September 20X0
Sales		77250
Cost of goods sold		45000
Gross profit		32250
Less: Operating expenses
Wages expense	9000
Rent expense	2000
Depreciation expense	250
Miscellaneous expense	8000
Advertising expense	3000
Total operating expenses		22250
Net income		10000

Balance Sheet

ITHACA ESPRESSO
Balance Sheet
At September 30, 20X0
Assets
Cash		44250
Accounts receivable		2200
Merchandise Inventory		73800
Prepaid rent		2000
Store Equipment	21000
Accumulated depreciation, store equipment	6400	14600
Total Assets		136850
Liabilities and Owners’ Equity
Accounts payable		52000
Paid-in Capital		30000
Retained earnings		54850
Total Liabilities and Owners’ Equity		136850

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