Jan Wei owns a cycle store that sells equipment, clothing, and other accessories

Question

Jan Wei owns a cycle store that sells equipment, clothing, and other accessories. During the month of June, the following activities occurred:

1.The business earned $30,000 from the sale of bicycles, clothing, and accessories. Half the sales were for cash and the other half was on account.

2.The merchandise that was sold originally cost $17,400.

3.Jan purchased additional merchandise on credit for $20,800.

4.Jan paid $18,000 to the suppliers of the merchandise purchased above.

5.The telephone, electricity, and water bills for the month came to $430. All but one of these bills, for $130, was paid by the end of the month.

6.Additional expenses for the month, including depreciation expense of $600, totalled $2,100. They were all paid in cash, except the depreciation expense, and were for repairs and maintenance done to the store.

7.At the end of May, Jan had an 8% loan for $5,000 outstanding with the bank. On the last day of June, Jan paid the monthly interest that was owed on the loan, and also paid $500 on the loan principal.

8.On the last day of June, a customer ordered a $1,300 bicycle. Jan did not have it in stock, so it was ordered and will be delivered in July. Since it was a special order, the customer paid a $300 deposit on it.

Required

Referring to the concepts discussed so far in this textbook:

a.  

Prepare journal entries for each transaction or adjustment

b.  

Calculate the net income for the month.

Explanation / Answer

b.

Date Accont title and explanation Debit Credit 1 Cash $        15,000 Accounts receivable $        15,000 Sales revenue $        30,000 2 Cost of goods sold $        17,400 Inventory $        17,400 3 Inventory $        20,800 Accounts payable $        20,800 4 Accounts payable $        18,000 Cash $        18,000 5 Utilities expense $              430 Cash $              300 Utilities payable $              130 6 Repairs and maintenance expense $          1,500 Cash $          1,500 Depeciation expense $              600 Accumulated depreciation $              600 7 Interest expense(5000 x 8%*1/12) $                33 loan $              500 Cash $              533 8 Unearned sales revenue $              300 Cash $              300

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