The transactions relating to the formation of Blue Co Stores, Inc , and its firs
ID: 2452450 • Letter: T
Question
The transactions relating to the formation of Blue Co Stores, Inc , and its first month of operations follow The firm was organized and the stockholders invested cash of $8,800 The firm borrowed $5,400 from the bank, a short-term note was signed Display cases and other store equipment costing $1,700 were purchased for cash The original list pnce of the equipment was $1,920, but a discount was received because the seller was having a sale A store location was rented, and $1,600 was paid for the first month's rent Inventory of $15,000 was purchased, $8,400 cash was paid to the suppliers, and the balance will be paid within 60 days During the first week of operations, merchandise that had cost $4,700 was sold for $5,700 cash . A newspaper ad costing $120 was arranged for, it ran during the second week of the store's operations The ad will be paid for in the next month Additional inventory costing $4,050 was purchased, cash of $1,300 was paid, and the balance is due in 30 days In the last three weeks of the first month, sales totaled $14,750, of which $9,900 was sold on account The cost of the goods sold totaled $8,900 Employee wages for the month totaled $1,800 these will be paid during the first week of the next month L The firm collected a total of $3,500 from the sales on account recorded in transaction /. The firm paid a total of $4,800 of the amount owed to suppliers from transaction e Prepare the journal entries for each of these transactionsExplanation / Answer
Date Account title Debit ($) Credit ($) (a) Cash 8,800 Common stock 8,800 [To record the investment in common stock.] (b) Cash 5,400 Notes payable 5,400 [To record the borrowal through notes payable.] (c) Equipment 1,920 Discount received 220 Cash 1,700 [To record the purchase of equipment and record the discount received.] (d) Store rent expense 1,600 Cash 1,600 [To record the store rent expense.] (e) Merchandize inventory 15,000 Cash 8,400 Accounts payable 6,600 [To record the purchase of inventory in cash and on account.] (f) Cash 5,700 Sales 5,700 [To record the cash sales.] Cost of goods sold 4,700 Inventory 4,700 [To record the cash of goods sold.] (g) Advertising expense 120 Advertising expense payable 120 [To record the outstanding expense.] (h) Merchandize inventory 4,050 Cash 1,300 Accounts payable 2,750 [To record the purchase of inventory in cash and on account.] (i) Cash 4,850 Accounts receivable 9,900 Sales 14,750 [To record the sales.] Cost of goods sold 8,900 Inventory 8,900 [To record the cash of goods sold.] (j) Wages expense 1,800 Wages payable 1,800 [To record the outstanding wages expense.] (k) Cash 3,500 Accounts receivable 3,500 [To record the collections from accounts receivable.] (l) Accounts payable 4,800 Cash 4,800 [To record the payments to accounts payable.]
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