XVZ Company began operations in 2019 and entered into the following transactions
ID: 2340534 • Letter: X
Question
XVZ Company began operations in 2019 and entered into the following transactions during the year: May 1: Sold common stock to owners for $200,000 cash. y 10: Purchased inventory costing $40,000 on account. Dune 1: Purchased equipment for $48,eee cash. The equipment was assigned a 10-year life and a $6,e00 residual value. August Purchased a two-year insurance policy for $24,000 cash. October 3: Sold one-half of the inventory that was purchased on May 10 to a customer for $49,000; the customer did not pay for the goods, but agreed to pay XYZ Company within ninety days. November 9: Paid stockholders $1a,a00 cash as a dividend. December 17: Collected a $22,000 partial payment from the customer who purchased the inventory on October 3. December 31: Recorded adjusting entries related to the equipment and the prepaid insurance. Calculate the amount of net income that XYZ Company would report in its 2019 income statement aften all the above transactions are recorded and all necessary adjusting entries are made and posted.Explanation / Answer
a. Journal Entry Date Account tittle & Explanation Debit Credit 01-May Cash $2,00,000 Common Stock $2,00,000 To Record Issuance of Common Stock 10-May Inventory $40,000 Account Payable $40,000 To Record Purchase of Inventrory 01-Jun Equiment $48,000 Cash $48,000 To Record Purchase of Equiment 01-Aug Prepaid Insurance $24,000 Cash $24,000 TO Record Purchase of 2 Year insuranc policy 03-Oct Account Recivable $49,000 Sales $49,000 To Rrecord Sale made agst Credit Cost of Goods Sold $20,000 Inventory $20,000 TO Record half of the inventory as COGS 09-Nov Dividend $10,000 Cash $10,000 To Record Dividend Paid 17-Dec Cash $22,000 Accoutn Recivable $22,000 To Record Amount Received from Customer 31-Dec Depreciation on Equipment $4,200 Accumulated Depreciation $4,200 (48000-6000)/10 To Record Depreciation on Equipment 31-Dec Insurance Expense (24000/24*5) $5,000 Prepaid Insurance $5,000 To Record Insurrance Expense Income Statement Sales Revenue $49,000 Lesss: Cost of Goods Sold $20,000 Depreciation Expense $4,200 Insurance Expense $5,000 $29,200 Net Income $19,800
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