During the past several months, you have decided to make some changes in your li

Question

During the past several months, you have decided to make some changes in your life. You have always wanted to open your own small business and have decided you finally will. You have decided you will open your own merchandising business on January 1, 2016.

During your planning for this Grand Opening, you made the following decisions for your business.

You will fund the opening of your business with a transfer from your personal bank account to the business bank account in the amount of $20,000 on Jan 1.

You have already signed a lease for a building for a monthly rent of $1000 and your first rental payment is due on Jan 1.

You will use a Perpetual inventory system and the LIFO method to account for your inventory.

You will sell your product to all customers on account. Your terms for all customers are 2/10, n/30.

To start out, you don’t plan on hiring any employees.

Assignment

Unadjusted trial balance, adjusting entries, adjusted trial balance, post closing trial balance, closing entries.

ACCOUNT TITLE 1 Cash DEBIT CREDIT $20,000.00 Capital $20,000.00 1,000.00 1 Rent Cash 1,000.00 1 Office Equipment $10,000.00 Cash $10,000.00 1 Inventory $ 4,000.00 Accounts Payable $ 4,000.00 2 Accounts Recievable $ 3,000.00 Sales Revenue $ 3,000.00 2 Cost of goods sold $ 2,000.00 Inventory $ 2,000.00 5 Office Supplies $ 1,000.00 Cash 1,000.00 2,940.00 60.00 9 Cash Discount Accounts Recievable $ 3,000.00 12 Inventory $ 4,000.00 Accounts Payable $ 4,000.00 15 Accounts Payable $ 4,000.00 Cash $ 4,000.00 16 Accounts Receivable $ 1,500.00 Sales Revenue 1,500.00 16 Cost of goods sold $ 1,100.00 Inventory 1,100.00 19 Office Expense $ 250.00 Cash $ 250.00 20 Adverisement Expense $ 100.00 Cash $ 100.00 27 Cash $ 1,500.00 Accounts Receivable 1,500.00 29 Accounts Receivable 4,500.00 Sales Revenue 4,500.00 30 Cost of goods sold 3,300.00 Inventory 3,300.00 30 Miscellaneous Expense $ 100.00 Cash $ 100.00 31 Telephone Expense $ 150.00 Cash $ 150.00 31 Electricity Expense $ 200.00 Cash $200.00 31 Depreciation $ 83.33 Accumulated Depreciation $ 83.33 31 Cost of goods sold $250.00 Office Supplies $ 250.00

Explanation / Answer

Adjusted trial Balance as on 31st Dec, 2015 Debit ($) Credit ($) cash (20000-1000-10000-1000+2940-4000-250+1500-100-100-150-200) 7640 accounts receivable (3000-3000+1500-1500+4500) 4500 office supplies (1000-250) 750 Inventory (4000-2000+4000-1100-3300) 1600 office equipment 10000 accumulated depreciation- office equipment 83.33 Accounts payable (4000+4000-4000) 4000 Capital 20000 sales revenue (3000+1500+4500) 9000 depreciation-office equipment 83.33 Electricity Expense 200 Miascellaneous expense 100 telephone expense 150 discount 60 rent expense 1000 cost of goods sold (2000+1100+3300+250) 6650 Advertising Expense 100 Office expense 250 Total 33083.33 33083.33 Date Account title and explanation Debit($) Credit($) Jan-31 Sales revenue 9000 Income summary 9000 (revenue account has been closed to income summary account) Jan-31 Cost of goods sold 6650 depreciation-office equipment 83.33 Electricity Expense 200 Miascellaneous expense 100 telephone expense 150 discount 60 rent expense 1000 Advertising Expense 100 Office expense 250 Sales 8593.33 (expenses account has been closed to income summary account) Income statement $ $ Sales revenue 9000 less: Cost of goods sold -6650 Gross Profit 2350 Less: Opearating Expenses depreciation-office equipment 83.33 Electricity Expense 200 Miascellaneous expense 100 telephone expense 150 discount 60 rent expense 1000 Advertising Expense 100 Office expense 250 1943.33 Net Income 406.67 Date Account title and explanation Debit($) Credit($) Jan-31 Income summary 406.67 Retained earnings 406.67 (income summary account has been closed to retained earnings account) Post Closing trial Balance as on 31st Dec, 2015 Debit ($) Credit ($) cash (20000-1000-10000-1000+2940-4000-250+1500-100-100-150-200) 7640 accounts receivable (3000-3000+1500-1500+4500) 4500 office supplies (1000-250) 750 Inventory (4000-2000+4000-1100-3300) 1600 office equipment 10000 accumulated depreciation- office equipment 83.33 Accounts payable (4000+4000-4000) 4000 Capital 20000 Retained earnings 406.67 24490 24490

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