David Sinclair operates a widget shop. The shop specializes in a selection of various widget products. You have been hired as manager. Your duties include maintaining the store?s financial records. The following transactions occurred during January, of this year.

a. Received a total of $20,000 cash and $20,000 new machinery for common stock.b. Paid six months? rent for the store at $1,725 per month (five months are prepaid).

c. Purchased and received inventory for $50,000 on account (2/10 and n/30 days.)

d. Purchased supplies for $8,600 cash.

e. Made sales on account for $45,000 with the costs of $28,000 at 2/10, n/30.

f. Negotiated and signed a two-year $36,000 loan at the bank, receiving cash at the time.g. Used the money from (f) to purchase several computers for $5,750; then used the balance for equipment for the shop.

h. Received payment for sales in (e) within the discount period

.i. Paid expenses: advertising expense of $1,200, and salaries of $6,500.

j. Made sales for cash totaling $35,000 with a costs of $18,000.

k. Made a payment on inventory accounts payable balance of $35,000 from transaction c above within the discount period.

l. Collected accounts receivable of $15,000 from customers after discount period.

m. Made a repair to equipment $3,700 cash.

n. Recorded Deprecation: for the computers of $250, $1,500 for machinery and for the equipment of $4,800.

o. Received a cash payment for widgets in advance of $8,000. Will deliver it next month.

p. Office supplies on hand at the end of month were $1,500

Required

1. Record journal entries for each of the transactions.

2. Prepare a trial balance.

3. Prepare an income statement at the end of the first month of operations ended January 31.

4. Prepare a statement of retained earnings for the period ended January 31.

5. Prepare a balance sheet as of January 31.

Transcribed Image Text:

David's Widget Shop-Merchandising Liabilities & Equity Accounts Payable Notes Payable Short term Long Term Notes Payable Common Stock Amount Assets Cash Accounts Receivable Supplies Inventory Equipment Accumulated Depreciation-Equipment Land Total Assets Amount $60,000 20,000 2,000 40,000 100,000 (40,000) $20,000 32,000 50,000 20,000 80,000 Retained Earnings 20,000 $202,000 Total Liabilities & Equity $202,000 David's Widget Shop-Merchandising Liabilities & Equity Accounts Payable Notes Payable Short term Long Term Notes Payable Common Stock Amount Assets Cash Accounts Receivable Supplies Inventory Equipment Accumulated Depreciation-Equipment Land Total Assets Amount $60,000 20,000 2,000 40,000 100,000 (40,000) $20,000 32,000 50,000 20,000 80,000 Retained Earnings 20,000 $202,000 Total Liabilities & Equity $202,000

Answer rating: 100% (QA)

SNo Accounts Debit Credit a Cash 20000 Machinery 20000 Common stock 40000 b Rent expense 1725 Prepaid rent 17255 8625 Cash 10350 c Inventory 50000 Acc... View the full answer