company begins business April 1, 2013. here are the transactions: 1. corporation
ID: 2371684 • Letter: C
Question
company begins business April 1, 2013. here are the transactions:
1. corporation issues $50,000 of stock
2. equipment for $30,000 was purchased, $20,000 in cash, balance on account
3. 6 month insurance policy was purchased on 4/1/2013 for $6,000 cash
4. wages of $12,000 were paid
5. borrowed $10,000 from bank, due in 6 months at 10% interest
6. sales were $30,000 all on account
7. made cash collections of $9,000 on accounts receivable
8. paid $6,000 due on equipment purchase
9. sold gift cards for $4,000
10. supplies were purchased for $1,500 cash
11. dividends of $3,000 were paid
miscellaneous info
1. depreciation is $500 for the month
2. interest on the note is $100 for the month
3. gift cards worth $1,500 were made in April
4. an inventory of supplies showed $900 remaining
required:
1. prepare all necessary journal entries for the month of April 2013
2. prepare the income statement, retained earnings statement and balance sheet for April
Explanation / Answer
R1: Journal entries
1.[DR] Cash- $50,000
[CR] Common stock- 50,000
2. [DR] Equipment- 30,000
[CR] Cash- 20,000
[CR] Accounts Payable- 10,000
3. [DR] Prepaid Insurance- 6,000
[CR] Cash- 6,000
At the end of the month there would be an adjusting entry for the used portion of insurance:
[DR] Insurance Expense- 1,000
[CR] Prepaid Insurance- 1,000
4. [DR] Wage Expense- 12,000
[CR] Cash- 12,000
5. [DR] Cash- 10,000
[CR] Npte Payable- 10,000
6. [DR] Accounts Receivable- 30,000
[CR] Sales- 30,000
7.[DR] Cash- 9,000
[CR] Accounts receivable- 9,000
8. [DR] Accounts Payable- 6,000
[CR] Cash- 6,000
9. [DR] Cash- 4,000
[CR] Unearned Revenue- 4,000
[DR] Cost of Goods Sold- 1,500
[CR] Inventory: gift cards - 1,500
10. [DR] Supplies- 1,500
[CR] Cash- 1,500
11. [DR] Dividends- 3,000
[CR] Cash
Miscellaneous Entries:
1. [DR] Depreciation expense- 500
[CR] Accumulated depreciation: equipment- 500
2. [DR] Interest Expense- 100
[CR] Interest payable- 100
3. [DR] Supplies Expense- 600
[CR] Supplies- 600
4. [DR] Inventory: gift cards- 1,500
[CR] Cash- 1,500
R2. Statements
[Company Name]
Income Statement
Period ending April 31
Sales- $30,000
Cost of goods sold- 1500
Gross Profit- 28,500
Expenses:
Insurance exp- 1,000
Wage exp- 12,000
Depreciation exp- 500
Interest exp- 100
Supplies exp- 600
Total Expenses- 14,200
Net Income- 14,300
[Company Name]
Statement of Retained Earnings
Period ending April 31
Retained Earnings, Apr. 1- $0
Net Income- 14,300
Subtotal- 14,300
Dividends- 3,000
Retained earnings, Apr. 31- 11,300
[Company Name]
Balance sheet
April 31
[Left side]
Assets:
Cash- $23,000
Accounts receivable- 21,000
Supplies- 900
Prepaid insurance- 5,000
Equipment- 30,000
Less: Accumulated depreciation- 500
Equipment, net- 29,500
Total assets: 79,400
[Right side]
Liabilities:
Accounts payable- 4,000
Note payable- 10,000
Unearned revenue- 4,000
Interest payable- 100
Total Liabilities- 18,100
Stockholder's Equity:
Common stock- 50,000
Retained Earnings- 11,300
Total stockholder's equity- 61,300
Total liabilities and stockholder's equity- 79,400
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