Question
Wursthaus, Inc. completed its sixth month of business, October: Wursthaus, Inc. Balance Sheet October 31 Cash $5,594 Accounts Payable $4,500 Accounts Receivable, Net of $435
Wursthaus, Inc. completed its sixth month of business, October:
Wursthaus, Inc. Balance Sheet October 31 | |||
Cash | $5,594 | Accounts Payable | $4,500 |
Accounts Receivable, Net of $435 Allowance |
| Wages Payable | 500 |
for Doubtful Accounts | 8,265 | Notes Payable | 3,926 |
Inventory | 675 |
|
|
Prepaid Insurance | 450 | Common Stock | 1,000 |
Equipment, net of $50 Accumulated Depreciation | 2,350 | Retained Earnings | 7,408 |
Total Assets | $17,334 | Total Liabilities and Shareholders' Equity | $17,334 |
Chart of Accounts | ||||
Accounts Payable | Dividends | Paid-in Capital in Excess of Par | ||
Accounts Receivable | Dividends Payable | Prepaid Insurance | ||
Accumulated Depreciation | Doubtful Accounts Expense | Retained Earnings | ||
Allowance for Doubtful Accounts | Equipment | Sales Revenue | ||
Cash | Insurance Expense | Treasury Stock | ||
Common Stock | Interest Expense | Wages Expense | ||
Cost of Goods Sold | Inventory | Wages Payable | ||
Depreciation Expense | Notes Payable |
The journal and ledger show the continuation of Wursthaus seventh month of business, November.
DATE | ACCOUNT TITLES AND EXPLANATIONS | DEBIT | CREDIT |
Nov. 1 | |||
1) Paid $4,500 for purchases made on account. | |||
Nov. 1 | |||
2) Purchased on account 1,500 sausages for $3.50 each, FOB Destination. | |||
Nov. 1 | |||
3) Paid $500 of wages owed from October. | |||
Nov. 1 | |||
4) Issued 5,000 shares of $1 par value common stock at a price of $5 each. The original owners have 1,000 shares. | |||
Nov. 2 | |||
5) Purchased 500 shares of its stock at price of $5.50 each | |||
Nov. 12 | |||
6) Sold 1,555 sausages on account at a price of $6. Wursthaus uses FIFO perpetual inventory. Prior to the sale, it had 225 sausages that cost $3 each in its beginning inventory and purchased 1,500 sausages that cost $3.50 each on November 1. | |||
Nov. 12 | |||
7) Wrote-off $450 of specific bankrupt customers accounts. | |||
Nov. 15 | |||
8) Collected $8,580 from the sales made on account. | |||
Nov. 30 | |||
9) Paid second installment payment of $94 on its $4,000, 6% note that was issued on Oct. 1. | |||
Nov. 30 | |||
10) Declared a $0.20 cash dividend per share to its shareholders to be paid December 31. | |||
Nov. 30 | |||
A1) Recorded the adjusting entry for uncollectible accounts. $500 of accounts receivables is estimated to be uncollectible. Recall that there was a beginning balance of $435 and a write off of $450. | |||
Nov. 30 | |||
A2) Adjusted for insurance used during the month. On September 1, $600 of insurance was paid in advance for eight months of insurance coverage. | |||
Nov. 30 | |||
A3) Adjusted for the use of the equipment with useful lives of 4 years. The original cost of the equipment is $2,400 with $0 residual value. | |||
Nov. 30 | |||
A4) Adjusted for $500 of wages owed that will be paid in the first week of December. |
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