Quiz 2 Jessica's Widget Shop-Merchandising (200 points)

Assets	Amount	Liabilities & Equity	Amount
Cash	$100,000	Accounts Payable	$22,000
Accounts Receivable	35,000	Notes Payable Short term	65,000
Supplies	4,000	Long Term Notes Payable	95,000
Inventory	40,000	Common Stock	30,000
Equipment	200,000	Additional Paid in Capital Common stock	20,000
Accumulated Depreciation-Equipment	(40,000)	Retained Earnings	195,000
Vehicle	60,000
Accumulated Depreciation-Vehicle	(12,000)
Land	40,000
Total Assets	$427,000	Total Liabilities & Equity	$427,000

Jessica Brady operates a widget shop. The shop specializes in a selection of various widget products. You have been hired as manager. Your duties include maintaining the store's financial records. Here above is the post-closing trial balance accounts at the end of the previous year. The following transactions occurred during January, of this year.

1. Received cash of $40,000 and $60,000 for machinery in exchange for common stock.

Debit to common stock and credit to cash and machinery

Debit to common stock and credit to cash and

Debit to cash and machinery and credit to common stock

Debit to machinery and credit to cash and common stock

1. Paid six months' rent for the store at $5,000 per month (five months are prepaid).

Debit to rent expense and credit to cash

Debit to prepaid rent and credit to cash

Debit to prepaid rent and rent expense and credit to cash

Debit to cash and credit to rent expense

1. Purchased inventory for $50,000 on account (2/10 and n/30 days.)

Debit to inventory and credit to cash

Debit to accounts receivable and credit to inventory

Debit to inventory and credit to accounts payable

Debit to accounts payable and credit to inventory

1. Purchased supplies for $7,700 on account.

Debit to accounts payable and credit to supplies

Debit to supplies expense and credit to accounts receivable

Debit to supplies and credit to accounts payable

Debit to supplies expense and credit to cash

1. Made sales on account for $98,000 with the costs of $49,000 at 2/10, n/30. (remember there are two entries here)

Debit to cash and credit to sales revenue

Debit to accounts receivable and credit to sales revenue

Debit to sales revenue and credit to cash

Debit to cash and credit to accounts receivable

AND

Debit to costs of goods sold and credit to sales revenue

Debit to inventory and credit to costs of goods sold

Debit to costs of goods sold and credit to inventory

Debit to inventory and credit to sales revenue

1. Negotiated and signed a two-year $100,000 loan at the bank, receiving cash at the time.

Debit to cash and credit to accounts payable

Debit to cash and credit to short term notes payable

Debit to cash and credit to long term notes payable

Debit to cash and credit to accounts receivable

1. Used the money from (f) to purchase several computers for $7,500; then used the balance for a vehicle-$35,000 and equipment-$57,500 for the shop.

Debit to long term loan payable and credit to computers, vehicle and equipment

Debit to cash and credit to computers, vehicle and equipment

Debit to loan payable and credit to cash

Debit to computers, vehicle, and equipment and credit to cash

1. Received payment for sales in (e) within the discount period.

Debit to sales discount and accounts receivable and credit to sales revenue

Debit to sales discount and cash and credit to account receivable

Debit to sales and credit to sales discount and accounts receivable

Debit to accounts receivable and credit to sales discount and sales revenue

1. Paid expenses: advertising expense of $8,000 and salaries of $18,500.

Debit to prepaid advertising and salaries and credit to cash

Debit to salaries and advertising expense and credit to accounts payable

Debit to advertising expense and salaries and credit to cash

Debit to advertising expense and salaries and credit to loan payable

1. Made sales for cash totaling $78,000 with a costs of $36,000.

Debit to accounts receivable and credit to inventory

Debit to inventory and credit to costs of goods sold

Debit to accounts receivable and credit to sales revenue

Debit to inventory and credit to costs of goods sold

Debit to cash and credit to sales revenue

Debit to inventory and credit to costs of goods sold

Debit to cash and credit to sales revenue

Debit to costs of goods sold and credit to inventory

1. Made a payment on inventory accounts payable balance of $40,000 from transaction c above within the discount period.

Debit to inventory and credit to accounts payable and cash

Debit to cash and credit to inventory and account payable

Debit to accounts payable and inventory and credit to cash

Debit to accounts payable and credit to inventory and cash

1. Collected accounts receivable of $28,000 from customers after discount period.

Debit to cash and credit to sales revenue

Debit to cash and credit accounts receivable

Debit to cash and credit to accounts payable

Debit to accounts receivable and credit to cash

1. Business is going well so issued more common stock. Sam purchased par value stock of $10,000 for $20,000 cash.

Debit to common stock and APIC-common stock and credit to cash

Debit to cash and credit to common stock

Debit to cash and credit to common stock and APIC-common stock

Debit to cash and credit to APIC-common stock

1. Record Deprecation: Help-all assets have no salvage value. Estimated useful lives: computers-3 years; machinery-7 years; vehicle-5 years; and for the equipment-15 years. (a/d-stands for accumulated depreciation)

Debit to depreciation expense and credit to a/d-computers, a/d-vehicle, a/d-machinery and a/d-equipment

Debit to depreciation expense and credit to accumulated depreciation

Debit to accumulated depreciation and credit to depreciation expense

Debit to depreciation expense and credit intangible assets

1. Received a cash payment for widgets in advance of $25,000. Will deliver it next month.

Debit to advanced payments and credit to widgets

Debit to cash and credit to widgets

Debit to cash and credit to unearned revenue

Debit to widgets and credit to unearned revenue

1. Office supplies on hand at the end of month were $3,000.

Debit to supplies and credit to supplies expense

Debit to supplies expense and credit to cash

Debit to supplies expense and credit to supplies

Debit to supplies and credit to cash

Hints

1. Follow the accounting cycle

2. Use the existing accounts and open new accounts when needed.

Required

1. Show and post to T accounts. Start by setting up all the existing accounts (12) above in a t account. Then open new accounts when needed. For example the first transaction adds furniture-a new asset so you will need a new t account for furniture. See chapter 2 for the accounts.