David and Richard Riley started up a company that sold DVDs and videos at a discount. They bought videos that were out of date in bulk, allowing them to sell them at low prices. They started out by just selling them online through their website and eventually grew to where they had a small store front.

They originally formed the company as a partnership, but when they decided to expand and have a store front, they incorporated and sold stock to some of their business associates to help finance their growth.

Operations:

Rileys buys videos and DVDs in bulk. When they opened up their store front, this allowed them to carry larger inventories and increase the volume of shipping. Riley uses perpetual inventory method on a first-in-first-out basis. Since everything is bought in bulk consisting of a variety of different movies, Riley makes no attempt to differentiate by type (DVD or VHS) or movie name.

Though the store front increased sales, the majority of sales come over the internet. There are not any consistent sales prices. Each movie sells at a different price, depending on demand. Riley also sells many movies on different auction sites. Thus, the prices can vary drastically.

In-state sales are charged a 6% sales tax. Out-of -state sales over the internet are not charged sales tax. Rileys also has started selling items to local stores who want to sell their products. Sales to other businesses for resale are not charges sales tax.

In order to deal with the volume of business, the brothers had to hire a few employees. They pay salaries only twice a month on the 15th and he 30^th or 31^st of each month, except February, which is on the 28^th or 29^th. Withholdings and sales taxes are paid before the 15^th of the following month.

Rileys has a calendar year end. You are to record the transaction for January, the first month of the new fiscal year, prepare the monthly adjustments prepare the financial statements.

1. Record the transactions for January.

2. Post the transactions for January

3. Prepare the Trial Balance (you may prepare the worksheet instead of a formal Trial Balance).

4. Record Adjusting Entries

5. Prepare an Adjusted Trial Balance (On worksheet if you choose the worksheet)

6. Prepare the Schedule of Accounts Receivable and the Schedule of Accounts Payable

7. Prepare Income Statement, Balance Sheet, and Statement of Changes in Stockholders Equity for the month ended January 31, 2009 in good form.

Jan. 3. Record sales for the week. To make things easier, we are going to only record cash sales weekly, though in a real business sales would be recorded more often. Internet sales are done for cash through PayPal. PayPal subtracts a fee from the amount that is received depending how the client paid PayPals. In store sales are paid with cash. Remember a 6% sales tax is charged on all instate sales.

Out-of-State Internet Sales 150 units $1,380

Instate Internet sales 10 units $ 100

In-Store Sales 55 units $ 600

PayPal fee $28

Jan. 3 Issued check 562 for $1,200 to pay rent for January.

Jan. 3 Issued check 563 to USPS for $365 for shipping for the above sales.

Jan. 3 Sold old computer(Office Equipment) costing $2,000 and having $800 of accumulated depreciation attached to it for $400 in cash.

Jan. 5 Received order of 5,000 DVDs from KLD Video. Invoice amount was for $18,367.35 which included shipping and handling. Terms of the order is 2/10, n/30. Riley policy is to take advantage of all discounts offered and records all purchases at the net amount, less the discount. If Riley fails to pay within the discounted period, the extra amount paid is charged to Discounts Lost and expensed as a finance charge.

Jan. 5 Issue check 564 to Custom DVD for the amount due on account.

Jan. 5 Received a $320 bill (Invoice number 312) from Morgan County Journal for advertising in this weeks newspaper.

Jan. 6 Electronically transferred $1,250 to Google for a variety of internet advertising campaigns. (Confirmation # 1234G234)

Jan 7. Received $120 from Jason Cridal for amount owed on account.

Jan 7. Jay Finn, owner of Finns Variety Shop stopped by the store to pick up more videos to be sold at his store. He purchased 250 DVDs on account for $1,500. Issued him invoice number 3321. Since Finn is buying the product to resale, he does not have to pay sales tax

Jan. 8 Purchased $650 of office supplies from Dans Office Supply Company on account.