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In excel format, answer questions 1 & 2:
Question #1
Transactions should follow this format, as in this transaction on Dec. 31 – “the company paid cash dividends of $5,000”:
Date Description DR CR
12/31 owner’s equity (dividends) 5,000
cash 5,000
Record the following transactions then construct the income statement, statement of owner’s equity and balance sheet.
On January 3 a company began business by issuing owner’s equity for $500,000 cash.
On Jan. 10 the company bought equipment of $400,000 using a 10-yr., 5% notes payable.
On Jan. 14 the company purchased merchandise inventory for $100,000 cash.
During the year the company had cash sales of $300,000.
During the year cost of goods sold were $75,000.
During the year operating expenses $100,000.
On Dec. 31 the company paid the interest expense in cash.
On Dec. 31 the company paid the income tax expense of $25,000 in cash.
On Dec. 31 the company paid cash dividends of $5,000.
Question #2
Summertime Fun is a local toy store which specializes in beach and pool toys. Sales are slow during the most of the year, including X-Mas; however, summer is particularly hectic. Here is some information about an inflatable bulldog:
Date Transaction # of Units Unit Cost Total
January 1st beginning inventory 10 $10 $ 100
February 7th purchase 12 $12 $ 144
July 29th purchase 60 $14 $ 840
November 27th purchase 15 $15 $ 225
December 14th purchase 3 $20 $ 60
total 100 units $1,369
At the end of the year, Summertime Fun had 25 of these inflatable bulldogs remaining.
Calculate ending inventory and cost of goods sold for this inflatable bulldogs using:
FIFO
LIFO
Weighted Average
Method Ending Inventory Cost of Goods Sold
FIFO ________________ ________________
LIFO ________________ ________________
Weighted Average ________________ ________________
Expert Answer
| JOURNAL ENTRY | ||||
| S. No. | DATE | ACCOUNT TITLE & EXPLANATION | DEBIT ($) | CREDIT ( $ ) |
| 1 | Jan-03 | Cash | 500000 | |
| Owner’s Equity | 500000 | |||
| TO Record business start | ||||
| 2 | 10 | Office Equipment | 400000 | |
| 10 Yr- 5% Notes Payable | 400000 | |||
| To record purchase of equipment | ||||
| 3 | 14 | Inventory | 100000 | |
| Cash | 100000 | |||
| To Record of Purchase of mercandise Inventory | ||||
| 4 | Sales Revenue | 300000 | ||
| cash | 300000 | |||
| To record cash sales during the year | ||||
| 5 | Cost of Goods Sold | 75000 | ||
| Inventory | 75000 | |||
| to record cost of goods sold | ||||
| 6 | Opearting Expenses | 100000 | ||
| CASH | 100000 | |||
| To record operating expenses | ||||
| 7 | 31 | Interest Expenses | 20000 | |
| cash | 20000 | |||
| To record Interest Exp. ( 400000 x 5%) | ||||
| 8 | 31 | Income Tax Expenses | 25000 | |
| Cash | 25000 | |||
| To receord I. Tax Expenses | ||||
| 9 | 31 | Owner’s Equity (Dividend) | 5000 | |
| Cash | 5000 | |||
| To record Divedend Paid | ||||
| LEDGER – CASH ACCOUNT | ||||
| PARTICULARS | Ref. No. | DEBIT ( $) | CREDIT ( $ ) | BALANCE |
| Owner’s Equity | 1 | 500000 | 500000 | |
| Inventory | 3 | 100000 | 400000 | |
| Sales revenue | 4 | 300000 | 700000 | |
| Operating Expenses | 6 | 100000 | 600000 | |
| Interest Expenses | 7 | 20000 | 580000 | |
| Income Tax Expenses | 8 | 25000 | 555000 | |
| Owner’s Equity (Div) | 9 | 5000 | 550000 | |
| Owner’s Equity | ||||
| PARTICULARS | Ref. No. | DEBIT ( $) | CREDIT ( $ ) | BALANCE |
| Cash | 1 | 500000 | 500000 | |
| LEDGER – OFFICE EQUIPMENT | ||||
| PARTICULARS | Ref. No. | DEBIT ( $) | CREDIT ( $ ) | BALANCE |
| Notes Payable | 2 | 400000 | 400000 | |
| LEDGER – Interest Expenses | ||||
| PARTICULARS | Ref. No. | DEBIT ( $) | CREDIT ( $ ) | BALANCE |
| CASH | 7 | 20000 | 20000 | |
| LEDGER -5 Yr- 105 Notes Payable | ||||
| PARTICULARS | Ref. No. | DEBIT ( $) | CREDIT ( $ ) | BALANCE |
| Office Equipment | 2 | 400000 | 400000 | |
| LEDGER – Operating expenses | ||||
| PARTICULARS | Ref. No. | DEBIT ( $) | CREDIT ( $ ) | BALANCE |
| CASH | 6 | 100000 | 100000 | |
| LEDGER – Sales Revenue | ||||
| PARTICULARS | Ref. No. | DEBIT ( $) | CREDIT ( $ ) | BALANCE |
| cash | 4 | 300000 | 300000 | |
| LEDGER – Purchase Inventory | ||||
| PARTICULARS | Ref. No. | DEBIT ( $) | CREDIT ( $ ) | BALANCE |
| Cash | 3 | 100000 | 100000 | |
| COGS | 5 | 75000 | 25000 | |
| LEDGER – Income Tax Expenses | ||||
| PARTICULARS | Ref. No. | DEBIT ( $) | CREDIT ( $ ) | BALANCE |
| CASH | 8 | 25000 | 25000 | |
| LEDGER – DIVIDEND | ||||
| PARTICULARS | Ref. No. | DEBIT ( $) | CREDIT ( $ ) | BALANCE |
| CASH | 9 | 5000 | 5000 | |
| LEDGER – Cost of Goods Sold | ||||
| PARTICULARS | Ref. No. | DEBIT ( $) | CREDIT ( $ ) | BALANCE |
| Inventory | 5 | 75000 | 75000 | |
| TRIAL BALANCE | ||
| 31ST DEC | ||
| Debit ($) | Credit($) | |
| Cash | 550000 | |
| Owner’s Equity | 500000 | |
| Office Equipment | 400000 | |
| Interest Expenses | 20000 | |
| 5 Yr Notes Payable | 400000 | |
| Operating Expenses | 100000 | |
| Sales Revenue | 300000 | |
| Inventory | 25000 | |
| Income Tax Expenses | 25000 | |
| Dividend | 5000 | |
| Cost of Goods Sold | 75000 | |
| Total | 1200000 | 1200000 |
| Income Statement | ||
| December,31 | ||
| ($) | ($) | |
| Revenues | 300,000 | |
| Less:- Cost of goods Sold | 75,000 | |
| Gross Profit | 225,000 | |
| Interest Expense | 20,000 | |
| Operating Expenese | 100,000 | 120,000 |
| Profit before Tax | 105,000 | |
| Income Tax Expenses | 25,000 | |
| Profit After tax | 80,000 | |
| Statement of Stockholder’s Equity | |||
| December,31 | |||
| Comman Stock ($) | Retained Earnings ($) | Total ($) | |
| Balance | 500,000 | 500,000 | |
| Add: Net income | 80,000 | 80,000 | |
| Less: Dividends Paid | (5,000) | (5,000) | |
| Balance | 500,000 | 75,000 | 575,000 |
| Balance Sheet | |||
| December,31 | |||
| Assets | ($) | Liabilities | ($) |
| Cash | 550,000 | Notes Payable | 400,000 |
| Accouts receviable | Stock holder’s equity | ||
| Inventory | 25,000 | Common stock | 500,000 |
| Total Currents Assests | 575,000 | Retained Earnings | 75,000 |
| Total Stockholder’s Equity | 575,000 | ||
| Equipment | 400,000 | ||
| Total Assets | 575,000 | Total Liabilities & Equity | 975,000 |
