John and Lou Topp are brothers. In May 2016, they decided to form a Company, Top
ID: 2402909 • Letter: J
Question
John and Lou Topp are brothers. In May 2016, they decided to form a Company, Top Dog, Inc. selling hot dogs. Required: Record the appropriate transactions and adjusting journal entries for Top Dog, Inc. The Company is on a perpetual inventory system. Write “N/A" if no entry is appropriate. (In a perpetual inventory system cost of goods sold and inventory amounts are adjusted for each sale vs a periodic system where inventory and cost of goods sold amounts are adjusted at the end of the year.) Hint 2- The general ledger accounts used by Top Dog, Inc. are as follows:
1-May 1, 2016 – John and Lou Topp invested $20,000 in the hot dog vending cart business by purchasing 2,000 shares of the common stock ($10 par value) of Top Dog, Inc.
2- May 1, 2016 – Top Dog, Inc. purchased a one year insurance policy in the amount of $2,400 beginning May 1, 2016 and expiring on April 30, 2017.
3-May 7, 2016 - Top Dog, Inc. purchased a hot dog stand for $10,000 for cash.
4-May 8, 2016 - Top Dog, Inc. purchased 1,000 hot dogs for $.20 each and 1,000 buns for $.05 each on account from Nathan’s Inc.
5-May 8, 2016 – Top Dog, Inc. purchased supplies from Nathans Inc. for $300 cash.
6-May 9, 2016 – Top Dog, Inc. hired two college students to work at the stand for $500 per week beginning on Monday, May 15.
7-May 15, 2016 – Top Dog, Inc. sells 900 hot dogs (and buns) for $3 each at a special event.
8-May 27, 2016 – Top Dog, Inc. pays their 2 employees in the amount of $2,000 for the prior two weeks of work. (ignore any payroll taxes).
9-May 31, 2016 – Top Dog, Inc. pays Nathans Inc. in full for the inventory purchased on May 8, 2016.
10-May 31, 2016 – Bank charges amounted to $15 for the month of May.
11-May 31, 2016 – A corporate customer paid Top Dog, Inc. $1,500 in advance for 500 hot dogs and buns to be delivered next week to a corporate sales event.
Month- End Adjustments – May
12- May 31, 2016 – Top Dog, Inc. depreciates the hot dog cart on a straight-line basis over 5 years.
13-May 31, 2016 – Top Dog Inc. adjusts the insurance account at month end for the premium paid on May 1, 2016.
14-May 31, 2016 – Rent for the cart space for May has not yet been paid in the amount of $200.
15-May 31, 2016 – May 31st is a Tuesday, and Top Dog’s two employees are paid $1,000 each every other Friday for a 10 day work week – Monday thru Friday). (Note: The last payroll was paid on Friday, May 27th)
16-Supplies on hand at the end of May amounted to $100.
Equipment
Rent Expense
Prepaid Insurance
Supplies Expense
Accounts Payable
Equipment
Sales
Unearned (Deferred) Revenue
Accumulated Depreciation - Equipment
Cash - Checking
Cost of Goods Sold
Salaries and Wages Payable
Insurance Expense
Accrued Expenses Payable
Salaries and Wages Expense
Depreciation Expense
Bank Charges
Inventory
Supplies (on Hand)
Common Stock
Retained Earnings
Equipment
Rent Expense
Prepaid Insurance
Supplies Expense
Accounts Payable
Equipment
Sales
Unearned (Deferred) Revenue
Accumulated Depreciation - Equipment
Cash - Checking
Cost of Goods Sold
Salaries and Wages Payable
Insurance Expense
Accrued Expenses Payable
Salaries and Wages Expense
Depreciation Expense
Bank Charges
Inventory
Supplies (on Hand)
Common Stock
Retained Earnings
Explanation / Answer
JOURNAL ENTRIES IN THE BOOKS OF TOP DOG INC FOR THE MONTH OF MAY 2016
1) MAY1,2016 FOR ISSUE OF COMMON STOCK
.CASH A/C DR 20000
TO COMMON STOCK 20000
2) MAY1, 2016 FOR PURCHASE OF INSURANCE POLICY
PREPAID INSURANCE A/C DR 2400
TO CASH A/C 2400
3) MAY 7, 2016 FOR PURCHASE OF HOT DOG CART
EQUIPMENT (CART) A/C DR 10000
TO CASH A/C 10000
4) MAY 8, 2016 FOR PURCHASE OF HOT DOGS AND BUNS
INVENTORY A/C DR [(1000*0.2)+(1000*0.05)] 700
TO ACCOUNTS PAYABLE (NATHAN'S) 700
5) MAY 8, 2016 FOR PURCHASE OF SUPPLIES
SUPPLIES A/C DR 300
TO CASH A/C 300
6) N/A
7) MAY 15, 2016 FOR SALES OF HOT DOGS
CASH A/C DR (900*3) 2700
TO SALES A/C 2700
COST OF GOODS SOLD A/C DR (900*0.25) 225
TO INVENTORY A/C 225
8) MAY 27, 2016 FOR SALARY PAID
SALARY AND WAGES EXPENSE A/C DR 2000
TO CASH A/C 2000
9) MAY 31, 2016 FOR NATHAN'S ACCOUNT SETTLED
ACCOUNTS PAYABLE (NATHAN'S) DR 700
TO CASH A/C 700
10) MAY 31, 2016 FOR BANK CHARGES
BANK CHARGES A/C DR 15
TO BANK A/C 15
11) MAY 31, 2016 FOR ADVANCE RECIEVED
CASH/ BANK A/C DR 1500
TO UNEARNED REVENUE 1500
12) MAY 31, 2016 FOR DEPRECIATION
DEPRECIATION EXP A/C DR [ (10000/5)/12] 166.67
TO ACCUMULATED DEPRECIATION EQUIPMENT A/C 166.67
13) MAY 31, 2016 FOR INSURANCE EXP ADJUSTED FOR THE MONTH OF MAY
INSURANCE EXPENSE A/C DR 200
TO PREPAID INSURANCE A/C 200
14) MAY 31, 2016 FOR RENT ACRRUED
RENT EXP A/C DR 200
TO RENT PAYABLES A/C 200
15) MAY 31, 2016 FOR SALARY AND WAGES ACCRUED
SALARY AND WAGES EXP A/C DR 800
TO SALARY AND WAGES PAYABLE A/C 800
{(2000/10)*4DAYS}
16) SUPPLIES ON HAND (CLOSING STOCK) DR 100
TO COST OF GOODS SOLD 100
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.