New River Fitness, Inc. began operations on January 2, 2021. The company is a retailer that sells athletic shoes and apparel, fitness accessories, and fitness equipment. The company had the following account balances on December 31, 2021: 

1. Cash and Cash Equivalents $87,362 
2. Accounts Receivable $39,250 
3. Supplies $2,500 
4. Inventory $116,130 
5. Computer Equipment, net of accumulated depreciation of $1,800 $13,500 
6. Furniture, Fixtures, and other equipment, net of accumulated depreciation of $13,750 $128,750 
7. Accounts Payable $31,991 
8. Salaries and Wages Payable $8,300 
9. Unearned Revenue $5,300 
10. Other current liabilities $6,475 
11. Common Stock $320,000 
12. Retained Earnings $15,426

The company rents the building that it operates out of, but it owns the computer equipment, furniture, and fixtures inside the building. The computer equipment has a useful life of 8 years and a salvage value of $900. The furniture, fixtures, and other equipment have an average useful life of 10 years and a salvage value of $5,000. The company uses straight-line depreciation/amortization on all long-term assets subject to depreciation or amortization. *The rental agreement for the building is a short-term lease that is renewed annually. 

Assume the company incurs the following transactions during the month of January 2022: January 1 The company pays $60,000 in cash for rent to cover the period from January 1, 2022, through December 31, 2022. January 1 The company pays $8,300 of its salaries and wages payable. January 1 The company borrows $110,000 in cash from the bank by issuing a note payable. The annual interest rate on the note is 4.265% and the company agrees to make 60 monthly payments of $2,039. January 2 The company purchases a comprehensive software application that manages inventory, sales, customers, and financial reporting for $4,000 in cash. 

New River Fitness also pays the software vendor $1,000 in cash to install and test the software and $500 to train its employees. The purchase of the software qualifies as a perpetual license and allows New River to use the software for an indefinite period of time. The company estimates that the software will be useful for 7 years and have no value after that. January 3 The company pays $20,000 on its accounts payable. January 5 A local gym places an order for $6,000 of fitness equipment. The gym pays $1,000 in cash in advance. January 6 The company collects $29,000 on its accounts receivable. January 7 The company delivers fitness equipment to a customer that paid for the equipment in advance in December. The customer paid $5,300. January 8 The company pays $3,625 of its other current liabilities. January 10 The company purchases $25,000 of inventory on account. January 16 The company’s employees earn $4,500 in salaries and wages for working the first half of January. The company pays these wages. (These wages had not been previously accrued/recorded). January 17 A company employee developed a special orthotic that can be used in running shoes to help alleviate knee pain. 

The employee used $1,800 in company supplies to develop the orthotic and the company paid $11,000 in legal fees to acquire the patent. The company estimates that this patent will be useful for 5 years and is currently searching for a company that can manufacture the orthotic. January 18 The company delivers the equipment to the local gym that placed the order on January 5. January 19 The company sells inventory for $101,280 and receives $75,490 in cash. The remainder is on the account. (These sales do not relate to the order placed by a customer on January 5.) January 20 The company pays $30,760 on its accounts payable. January 25 The company signs a contract with a local gym to deliver products having a total selling price of $8,100. The company agrees to deliver the products on February 5, 2022. The gym has up to 10 days after delivery to pay for the products. The cost of the products is $4,860. January 30 The first payment of $2,039 is made on the note payable issued on January 1. After this payment, the remaining balance on the note is $108,352 of which $20,239 is due within the next 12 months. January 30 The company pays cash dividends of $3,000. 

Additional information: 

1. Employees are owed wages of $4,600 for the second half of January. Employees will be paid on February 2. 

2. The company incurred $5,300 in other expenses during January. These expenses will be paid in February. 

3. Based on a physical count of ending inventory, New River Fitness has an inventory costing $74,582 on hand. 

4. Assume the tax rate is 21%. Taxes will be paid in February. 

Question 1. Record the above transactions in a financial statement effects template.

Answer rating: 100% (QA)

Income Statement Revenue Sales 101280 Unearned revenue 5300 Total revenue 106580 ... View the full answer