Acquired $9,600 of merchandise from Bob Hall, the owner, who had acquired the me

Question

Acquired $9,600 of merchandise from Bob Hall, the owner, who had acquired the merchandise prior to opening the shop. Issued common stock to Bob in exchange for the merchandise inventory.

Physically counted inventory, which indicated that $28,500 of inventory was on hand at the end of the accounting period.

A. Record each transaction in general journal form using the periodic method: record entry for issuance of common stock, record entry for issuance of common stock in exchange for the merchandise inventory, record entry for inventory purchased on amount, record entry for radio ads paid, record sale of inventory for cash, record entry for salary paid to a part time sales person, record entry cash paid for accounts payable, record adjusting entry for physical counted inventory on hand at the end of the accounting period.

B. Post each of the events to ledger T-accounts.

C. Prepare an income statement of changes in stockholders equity, balance sheet, and statement of cash flows.

D. Prepare the necessary closing entries at the end of 2016, and post them to the appropiate T-accounts.

E. Prepare a post-closing trial balance

The following transactions apply to Bob’s Bike Shop for 2016, its first year of operations:

Explanation / Answer

JOURNAL ENTRIES

Answer 1 & Answere 4

Cash

To CApital Stock

35000

Merchandise Inventory

To Capital Stock

9600

Inventory

To Accounts Payable

85000

Radio Add

To Cash

2800

Cash

cost of goods sold

To Inventory

To sales revenue

165000

85000

85000

165000

Salary

To Cash

28000

Accounts Payable

To Cash

65000

P/L

TO SALARY

28000

P/L

TO RADIO ADD

2800

SALES REVENUE

TO P/L

165000

Answer 2 & ANSWER 4

LEDGER ACCOUNTS

CAPITAL A/C

INVENTORY A/C

MERCHANDISE INVENTORY

RADIO ADD

SALARY

28000

ACCOUNTS PAYABLE

CASH

SALES REVENUE

aNSWER 3

INCOME STATEMENT

BALANCE SHEET

CAPITAL 44600

ADD: NET PROFIT 49200

S.no. ENTRY Debit ($) Credit ($) 1

Cash

To CApital Stock

35000

35000

2

Merchandise Inventory

To Capital Stock

9600

9600

3

Inventory

To Accounts Payable

85000

85000

4

Radio Add

To Cash

2800

2800

5

Cash

cost of goods sold

To Inventory

To sales revenue

165000

85000

85000

165000

6

Salary

To Cash

28000

28000

7

Accounts Payable

To Cash

65000

65000

ANSWER4 ADJUSTING ENTRIES

P/L

TO SALARY

28000

28000

P/L

TO RADIO ADD

2800

2800

SALES REVENUE

TO P/L

165000

165000

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