Fixed Assets

Property and Equipment are stated on the basis of historical cost. Depreciation of furniture, fixtures and equipment are computed for financial reporting purposes on a straight-line basis, using service lives of 8 years for furniture, 5 years for fixtures, and 4 years for equipment. No salvage value is anticipated.

Revenue Recognition

The Company recognizes sales upon customer receipt of the merchandise. Shipping and handling revenues are included in sales and the related costs are included in costs of goods sold. Revenue for gift certificate sales is recognized at redemption

The following events took place during the month of July, 2019 affecting Aggie Spirit.

JULY TRANSACTIONS:

1- July 1 Three brothers organized Aggie Spirit by contributing $40,000 each to organize Aggie

Spirit in exchange for shares of common stock.

2 -July 1 Aggie Spirit signed a lease agreement by signing a twelve-month lease and made a $9,000 advance payment for two months rent.

3 -July 2 A six-month advertising campaign was purchased to display print ads in the local media and prepare all direct mail catalogs beginning the first week of July and running through December 31. Aggie Spirit paid $18,000 in advance for this ad campaign.

4 -July 2 Aggie Spirit purchased the following assets, paying 25% down and giving a

two-year, 5% note for the balance.

Furniture $14,500

Fixtures 8,000

Equipment 9,200

5 -July 2 Apparel merchandise costing $15,400 was purchased. The company paid 30% down and put the rest on account. The merchandise will be available for resale to customers.

6 -July 3 Purchased a 6 month insurance policy with Good Hand Insurance Company. Aggie Spirit paid the premium in advance of $2,400.

7 -July 4 Store Supplies costing $800 were purchased on account.

8 -July 5 Gift inventory costing $9,410 was purchased on account. Aggie Spirit has 30

days to pay the total amount.

9 -July 6 Catalog orders of $3,200 were received and shipped for both apparel and gift merchandise. All catalogue sales are on account. The cost of the merchandise sold included the following:

Apparel $ 880 Gifts $ 445

10 -July 8 The stores cash register receipts indicate the following sales transactions:

Sales Category $ Sales Amount $ Cost of Merchandise

Apparel $6,600 $2,600

Gift 2,900 1,370

Of these sales, 40% were made on account.

11 -July 9 For the first week of July, $1,000 of gift certificates were sold. All gift certificate sales were cash transactions.

12 -July 10 Paid the total amount due to the apparel supplier for purchases made on July 2.

13 -July 14 During the first half of July, received $4,200 cash from credit customers for collection of their accounts

14 -July 15 Wages and salaries totaling $6,750 were paid to the Aggie Spirit employees.

15 -July 16 A Welcome Back Aggies sidewalk sale generated the following transactions: Store records indicated that apparel merchandise costing $4,950 was sold for $13,500. Of these sales, $3,400 were cash sales. Additionally, gift merchandise retailing for $11,100 and costing $5,200 was sold. Fifty percent of these were cash sales.

16- July 18 Gift Certificates totaling $390 were redeemed for apparel merchandise. The original cost of the merchandise sold was $225.

17- July 19 Aggie Spirit received a bill from its attorney amounting to $765 for legal services

rendered.

18 -July 20 The company purchased additional inventory on credit as follows:

Apparel $ 2,200

Gifts 1,900

19 -July 21 Aggie Spirit paid $3,300 towards the July 5 purchase of gift inventory.

20 -July 24 The board of directors declared and paid a $1,500 cash distribution to each of its owners.

21 -July 25 A customer orders custom apparel from Aggie Spirit and pays the company $100 cash.

22 -July 26 The company received $6,215 in cash for payment on customers accounts.

23 -July 28 A utility bill was received that totaled $500 for the month. It is due August 10.

24 -July 29 Additional equipment costing $7,000 was purchased with cash.

25 -July 30 Aggie Spirit had catalog sales during the remainder of the month totaling $2,930 in apparel sales and $1,900 in gift sales. Cost of the goods sold were $1,240 and $850 respectively. All catalog sales are made on credit.

26 -July 31 In-store sales for the last half of July were as follows:

Sales Category $ Sales Amount $ Cost of Merchandise

Apparel $5,940 $2,560

Gift 2,120 800

Of these sales 65% were made on account.

27 -July 31 Purchased additional supplies for $450 cash.

28 -July 31 Purchased land for $80,000 with the intent to build a new store in the near future.

Made a $20,000 cash down payment and signed a 4-year, 5% note with First National Bank for the balance.

Trial Balance before adjustment: $267,340

Additional Information:

1. Salaries are paid to employees on the 1^st and 15^th of each month. As of July 31, accrued salaries earned but not yet paid totaled $6,675.
2. There were $250 of Supplies still on hand as of July 31.
3. At the end of the month, a physical count was taken of Aggie Spirits inventories. It revealed the following information:

a. Apparel Inventory on hand at the end of the month amounted to $5,075. b. Gift Inventory on hand at the end of the month totaled $2,585.

Reminder: These are only the adjusting entries that require additional

information. You will need to go back to the original transactions to determine what other accounts require adjustment and how much the adjustment should be. Please round all amounts to the nearest dollar.

You should have a total of eight adjusting entries.

1. What are the journal entries?

2. What are the adjusting journal entries?