Because Natalie has had such a successful first few months, she is considering o
ID: 2358585 • Letter: B
Question
Because Natalie has had such a successful first few months, she is considering other opportunities to develop her business. One opportunity is the sale of fine European mixers. The owner of Kzinski Supply Co. has approached Natalie to become the exclusive distributor of these fine mixers in her state. The current cost of a mixer is approximately $575, and Natalie would sell each one for $1,150. Natalie comes to you for advice on how to account for these mixers. Each appliance has a serial number and can be easily identified. In the end, Natalie decides to use the perpetual inventory system to track her inventory. The following transactions happen during the month of January. Date Transaction Jan 4 Bought five deluxe mixers on account from Kzinski Supply Co. for $2,875, FOB shipping point, terms n/30. 6 Paid $100 freight on the January 4 purchase. 7 Returned one of the mixers to Kzinski because it was damaged during shipping. Kzinski issues Cookie Creations credit for the cost of mixer plus $20 for the cost of freight that was paid on January 6 for one mixer 8 Collected $375 of the accounts receivable from December 2009. 12 Three deluxe mixers are sold on account for $3,450, FOB destination, terns n/30. (Cost of goods sold is $595 per mixer.) 14 Paid the $75 of delivery charges for the three mixers that were sold on January 12. 14 Bought four deluxe mixers on account from Kzinski Supply Co. for $2,300, FOB ship ping point, terms n/30. 17 Natalie is concerned that there is not enough cash available to pay for all of the mixers purchased. She invests an additional $1,000 cash in Cookie Creations. 18 Paid $80 freight on the January 14 purchase 20 Sold two deluxe mixers for $2,300 cash. (Cost of goods sold is $595 per mixer.) 28 Natalie issued a check to her assistant for all the help the assistant has given her during the month. Her assistant worked 20 hours in January and is also paid the $56 owed at December 31, 2009. (NatalieExplanation / Answer
Solution:
Particulars Debit Credit
date
Jan-04 Inventory $2,875
Account payable $2,875
Jan-06 Inventory $100
Cash $100
Jan-07 Account payable $595
Inventory $595
Jan-08 Cash $375
Accounts receivable $375
Jan-12 Accounts receivable $3,450
sales revenue $3,450
Jan-12 Cost of sold $1,785
Inventory $1,785
Jan-14 Freigh-out $75
Cash $75
Jan-14 Inventory $2,300
Account payable $2,300
Jan-17 Cash $1,000
Investment $1,000
Jan-18 Freigh-out $80
Cash $80
Jan-20 Cash $2,300
sales revenue $2,300
Jan-20 Cost of sold $1,190
Inventory $1,190
Jan-28 Wage expense $160
Wage payable $56
Cash $216
Jan-28 Cash $3,450
Accounts receivable $3,450
Jan-30 Telephone expense $70
Account paybale $75
Cash $145
Jan-31 Account paybale $4,580
Cash $4,580
Jan-31 Owner's drawing $750
Cash $750
TRIAL BALANCE:
Debit Credit
Account payable $75
Accounts receivable $375
Cash $1,179
Cost of sold $2,975
Freigh-out $155
Inventory $1,705
Owner's drawing $750
Telephone expense $70
Wage payable $56
Wage expense $160
Investment $1,000
Sales revenue $5,750
$7,125 $7,125
ADJUSTING JOURNAL ENRIES:
Jan-04 inventory $2,875
account payable $2,875
Jan-06 inventory $100
cash $100
Jan-07 account payable $595
inventory $595
Jan-08 cash $375
accounts receivable $375
Jan-12 accounts receivable $3,450
sales revenue $3,450
Jan-12 cost of sold $1,785
inventory $1,785
Jan-14 freight-out $75
cash $75
Jan-14 inventory $2,300
account payable $2,300
Jan-17 cash $1,000
investment $1,000
Jan-18 freight-out $80
cash $80
Jan-20 cash $2,300
sales revenue $2,300
Jan-20 cost of sold $1,190
inventory $1,190
Jan-28 wasge expense $160
wage payable $56
cash $216
Jan-28 cash $3,450
accounts receivable $3,450
Jan-30 tel. expense $70
account payable $75
cash $145
Jan-31 account payable $4,580
cash $4,580
Jan-30 owner's drawing $750
cash $750
ADJUSTED TRIAL BALANCE
Debit Credit
Cash $2,359
Accounts Receivable $875 $375
Supplies $350
Prepaid Insurance $1,210
Equipment $1,200
Accumulated Depreciation—Equipment $40
Accounts Payable $0
Notes Payable $2,000
owner’s equity $3,969
Investment $1,000
Inventory $1,705
Salaries and Wages Payable $0
Interest Payable $15
Unearned Service Revenue $300
$7,699 $7,699
Income statement:
SALES
Sales revenue $5,750
Minus: COGS $2,975
Gross profit $2,775
Operating expense
Telephone expense $70
Wage payable $56
Wage expense $160
Freight-out $155
Total operating expenses $441
Income from operations $2,334
Other expenses and losses $2,334
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