In the first month of its operations, Tuchel Corporation, a retailer of home appliances, had the following
Question:
In the first month of its operations, Tuchel Corporation, a retailer of home appliances, had the following transactions:
(1) Incorporated on October 1, 2021. Issued 7,000,000 shares of common stock for $3 per stock.
(2) Paid $45,000 for rent on administrative offices on October 1 for the rest of 2021.
(3) Acquired a warehouse for $1,000,000 cash on October 1. The building has a 50-year life with a $100,000 salvage value. The company uses straight-line depreciation method.
(4) On October 2, purchased $7,000,000 of home appliance inventory on account.
(5) On October 5, purchased $2,000,000 of home appliance inventory and paid cash.
(6) On October 10, lent $3,600,000 to Klopp Corporation. Tuchel charges Klopp an annual interest of 10 percent. Klopp will pay the entire principal and the annual interest on October 10, 2022.
(7) On October 23, received an order of $1,000,000 for a construction project. Inventory is to be delivered in April 2021. The construction company paid for 20 percent of the order in cash on October 23.
(8) Paid $170,000 in payroll on October 30; $100,000 to warehouse personnel and $70,000 to administrative staff.
(9) Paid utilities of $30,000 on October 30; $20,000 for the warehouse and $10,000 for the administrative offices.
(10) Sales for the month totaled $4,500,000, and 60 percent of sales are credit sales.
(11) The cost of inventory sold equals 40 percent of the total production cost at the end of the month.
(12) 2 percent of the outstanding receivables as of October 31 are estimated to be uncollectible.
(13) Corporate income tax rate is 21 percent and will be paid in April of next year.
(14) Declared cash dividends of $200,000 on October 31 to be paid in February 2022.
1. Analyze and record the transactions for the first month of operations. Indicate the effect of each transaction on the balance sheet equation.
2. Post the transactions to the ledger/T-accounts (see T-accounts template on pages 5-6)
3. Prepare an unadjusted trial balance (see template on page 4)
4. Record adjusting entries (see template on page 3)
5. Post the adjusting entries to the T-accounts
6. Prepare an adjusted trial balance (see template on page 4)
7. Prepare the following financial statements: a. Income Statement b. Statement of Retained Earnings c. Balance Sheet
8. Prepare closing entries (see template on page 3)
9. Post the closing entries to the T-accounts
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