The Tusquittee Company is a retail company that began operations on October 1, 2

Question

The Tusquittee Company is a retail company that began operations on October 1, 2018, when it incorporated in the state of North Carolina. The Tusquittee Company is authorized to issue 100,000 shares of $1 par value common stock and 50,000 shares of 5%, $50 par value preferred stock. The company sells a product that includes a one-year warranty and records estimated warranty payable each month. Customers are charged a 6% state sales tax. The company uses a perpetual inventory system. There are three employees that are paid a monthly salary on the last day of the month. Following is the chart of accounts for The Tusquittee Company. As a new business, all beginning balances are $0. The Tusquittee Company Chart of Accounts Cash Merchandise Inventory Land Building Store Fixtures Accumulated Depreciation Accounts Payable Employee Income Taxes Payable Dividends Payable-Common Notes Payable Mortgages Payable Common Stock -$1 Par Value Paid-In Capital in Excess of Par Common Paid-In Capital from Treasury Stock Transactions Retained Earnings Treasury Stock Common

Explanation / Answer

The Tusquitee Company ($) Debit Credit 01-Oct-18 Cash 250000 Common Stock 25000 Paid in capital in excess of par - Common 225000 (25000 shares of par value $1 issued at a premium of $9/share) 01-Oct-18 Bank 200000 8% Mortgage 200000 ($200000 10-year 8% over Land and Building Market values: $ Land 40000 Building 160000 Total 200000 01-Oct-18 Store Fixtures 10000 Note Payable (10%) 10000 (Note payable issued for Store Fixtures (10%) Principal and Interest payable on Oct 1, 2019) 03-Oct-18 Inventory 125000 Top Rate 125000 (Merchandise inventory purchased from Top Rate (terms n/30) 15-Oct-18 Utilities 160 Cash 160 (Utilities paid for) 31-Oct-18 Cash 185000 Sales 185000 (Cash sales for the month) Cash 11100 Sales Tax Payable 11100 (Sales Tax for the month @6%) 31-Oct-18 Cost of goods sold 110000 Inventory 110000 (Cost of goods sold for the month) 31-Oct-18 Warranty Expense (8%) 14800 Estimated Warranty Liability 14800 (Estimated warranty on month's sales) Mortgage Payment Schedule Salaries Expense Month Note: No information about payroll in the question) Mortgage 20000 133 Interest 133.3333 01-Nov-18 8% Mortgage 2292 20133 Mortgage Interest 133 2425 Principal 2291.667 Bank 2425 17708 1 (Monthly mortgage payment) 118 Interest 118 17826 03-Nov-18 Top Rate 125000 2425 Principal 2307 Bank 125000 15401 2 (Paid Top Rate for inventory purchased 103 on Oct 1) 15504 2425 10-Nov-18 Inventory 150000 13079 3 Top Rate 150000 87 (Inventory purchased terms n/30) 13166 2425 12-Nov-18 Treasury Stock 500 10741 4 Paid in excess of par value (Treasury Stock) 7000 Bank 7500 15-Nov-18 No information about payroll 15-Nov-18 Sales Tax Payable Bank (Paid Sales Tax for October to North Carolina) 15-Nov-18 Estimated Warranty Liability 6000 Bank 6000 (Paid against warranty liabilty for October) 17-Nov-18 Dividend on Common Stock 25000 Dividend Payable 25000 (Dividend on outstanding shares of common stock declared) 18-Nov-18 Utilities 245 Bank 245 (Paid for utilities) 27-Nov-18 Dividend Payable 25000 Bank 25000 (Dividend paid) 30-Nov-18 Cash 148400 Sales Revenue 140000 Sales Tax Payable 8400 (Cash sales and sales tax for the month) 30-Nov-18 No payroll information 01-Dec-18 8% Mortgage 2307 Mortgage Interest 118 Bank 2425 (Second mortgage payment) 10-Dec-18 Tip Top 150000 Bank 150000 (Paid Tip Top for Nov purchases) 12-Dec-18 Estimated Warranty Liability 7500 Bank 7500 (Estimated Warranty Liabilty paid) 15-Dec-18 Bank 6000 Treasury Stock 300 Paid in excess of par value (Treasury Stock) 5700 (300 shares of Teasury Stock sold) 15-Dec-18 No payroll information 15-Dec-18 Sales Tax Payable 8400 Bank 8400 (Paid Sales Tax for November to North Carolina) 18-Dec-18 Util;ities 220 Bank 220 19-Dec-18 Inventory 90000 Tip Top 90000 31-Dec-18 Cash 222600 Sales Revenue 210000 Sales tax payable 12600

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