Stocken Surf Shop began operations on July 1, 2010, with an initial investment of \(\$ 50.000\). During the first three months of operations, the following cash transactions were recorded in the firm's checking account.

Additional information:
1. Most sales were for cash, however, the store accepted a limited amount of credit sales; at September 30, 2010, customers owed the store \(\$ 9,000\).
2. Rent was paid on July 1 for six months.
3. Salaries of \(\$ 3,000\) per month were paid on the 1 st of each month for salaries earned in the month prior.
4. Inventories were purchased for cash; at September 30, 2010, inventory of \(\$ 21,000\) was still available.
5. Fixtures and equipment were expected to last five years (or 60 months) with zero salvage value.
6. The bank charges \(12 \%\) annual interest ( \(1 \%\) per month) on the \(\$ 10,000\) bank loan. Stocken took the loan out July 1 .
\section*{Required}
a. Record all of Stocken's cash transactions and prepare any necessary adjusting entries at
- September 30, 2010. You may either use the financial statement effects template or journal entries combined with T-accounts.
b. Prepare the income statement for the three months ended September 30, 2010, and the balance
- sheet at September 30,2010
c. Analyze the statements from part \(b\) and assess the company's performance over its initial three months

Transcribed Image Text:

Deposits Initial investment by owner .... $ 50,000 Collected from customers Borrowings from bank 81,000 10,000 $141,000 Checks drawn Rent..... Fixtures and equipment.. Merchandise inventory. Salaries.... Other expenses. $ 24,000 25,000 62.000 6.000 13.000 $130,000