Need Help Making the Journal entries and adding the line of credit (description
ID: 2413080 • Letter: N
Question
Need Help Making the Journal entries and adding the line of credit (description in bold)and intereset in the journal entries.
You are the accountant for Grandpa’s Cough Inc. Please use the following Chart of accounts when preparing the necessary journal entries to prepare monthly Financial Statements, and close temporary accounts.
CHART OF ACCOUNTS
101
Cash
230
Interest Payable
106
Accounts Receivable
301
Common Stock
110
Allowance For Doubtful Accounts
350
Retained Earnings
126
Inventory
405
Sales Revenue
128
Prepaid Insurance
406
Sales Discounts and Allowance
131
Prepaid Rent
501
Cost of Goods Sold
135
Prepaid Advertising
520
Utility Expense
163
Office Equipment
525
Wage Expense
164
Mixing Barrels
530
Interest Expense
165
Factory Equipment
535
Rent expense
190
Accumulated Depreciation
545
Insurance Expense
201
Accounts Payable
550
Bad Debt Expense
215
Notes Payable
560
Depreciation Expense
220
Line of Credit
565
Advertising Expense
225
Income Taxes Payable
570
Income Tax Expense
Company Background and Accounting Policies:
? Grandpa’s Cough Inc. (GCI) sells a uniquely flavored cough syrup either wholesale or through its own storefront. GCI opened its doors during January 2018, and closes its books each month.
? Cases contain 24 bottles. Each bottle costs the company $2 to make and the company sells bottles for $4.5. Each case is sold for $90 the cost to ship is paid for by the customer.
? Customers pay on the last day of their terms unless otherwise noted.
? GCI has a revolving line of credit with a local bank (it works like a credit card or a
short term loan), if the cash balance drops below $15,000 then GCI will draw money against the line of credit in $5,000 increments (read the amount of the transaction is divisible by 5,000), until the Cash balance is above $25,000.
? Simple interest rate on the line of credit is 5%. Interest accrues daily starting the day the money is borrowed (time is N/365) and paid at the end of each month (only one transaction is necessary to accrue and pay interest).
? The balance of line of credit is paid back at the end of the month, to the point that the cash balance is no less than $15,000 after the payment.
? The company maintains inventory at $72,000, and will purchase materials every time the inventory drops below that amount in $4,000 increments, vendor pays shipping. Terms are N/15.
? GCI pays all bills on the last day of the terms.
? Round all answers to the nearest dollar
Grandpa's Cough Inc. Balance Sheet
As of February 28, 2018
Assets
Current Assets
Cash
$ 16,684
Accounts Receivable
20,000
Allowance for Doubtful Accounts
(4,000)
Inventory
50,000
Prepaid Insurance
1,400
Prepaid Rent
3,300
Total Current Assets
$ 87,384
Fixed Assets
Office Equipment
$ 2,400
Mixing Barrels
7,200
Factory Equipment
21,600
Less: Accumulated Depreciation
(8,940)
Total Fixed Assets
$ 22,260
Total Assets
$ 109,644
Liabilities and Stockholders' Equity
Current Liabilities
Accounts Payable
$ 20,000
Income Taxes Payable
12,000
Interest Payable
44
Current Portion of Long Term Debt
1,600
Total Current Liabilities
$ 33,644
Long Term Debt
Notes Payable
$ 16,000
Total Long Term Debt
16,000
Total Liabilities
$ 49,644
Stockholders' Equity
Retained Earnings
$ 40,000
Common Stock
20,000
Total Stockholders' Equity
60,000
Total Liabilities and Stockholders' Equity
$ 109,644
Date
Transaction
March 1, 2018
Gene Autry became a new owner by investing $25,000 Cash and office equipment worth $5,760 in return for common stock of Grandpa’s Cough Inc.
1
Purchased Mixing Barrels worth $3,000 and Other Factory Equipment worth $3,600 on credit, N/30
1
Purchased Inventory on credit for $72,000 with terms N/15
1
Paid Vendor $20,000 for prior month purchases
2
Paid $8,400 for the store's annual premium on insurance, coverage starts on March 15.
3
During the grand opening of the store GCI sold 200 Bottles of Cough Syrup.
4
A wholesale customer ordered 500 cases, GCI shipped the order and billed the customer 2/5 N/10
5
Received payment from customer from prior month sale $5,000.
6
Sold 300 Bottles of Cough Syrup through the store.
7
Received half the payment for sale of goods on March 4
10
Paid $4,200 for three months’ rent for store front starting on March 1, 2017.
13
Sold 400 Bottles of Cough Syrup through the store
15
Shipped order for another wholesale customer 500 cases N/10
15
Received and paid Utility Bill for $500
18
Shipped order of 300 Cases to a wholesale customer N/10
20
Sold 700 Bottles of Cough Syrup through the store
25
Shipped order to wholesale customer 1,000 cases 2/10 N/30
26
Paid for mixing barrels and equipment purchased on March 1
27
Sold 3,000 bottles of Cough Syrup through the store
30
Received final payment from prior month’s Account Receivablebalance.
31
Paid wages under the table to employees of $5,000
31
Pleased with success of their plan, GCI paid $12,000 for a 12 month advertising campaign through local radio stations. The campaign started January 1st. GCI did not previously record any transactions related to this contract.
Additional Project information:
? Ensure you are using the February 28 balance sheet for the beginning balances of your accounts.
? When you are setting up your accounts use the chart of accounts included on the front page (you will not need to create any new account or account number).
? Please follow the journal entry format from the first two weeks of class.
? There is only one general journal where all transactions are recorded.
? Pay close attention to the transactions as they are listed on page three, these are
not all the transactions you will need to journalize. The accounting policies on
page 1 will require you to post additional entries (it helps to keep a tickler file).
? The store only allows cash sales.
Adjusting Journal Entry Information:
The beginning balance in Prepaid Rent was for the factory as of February 28, 2018 the balance had two months remaining.
Prior Period Prepaid Insurance was for an annual policy on the factory and had two months remaining on the policy.
Assume a half month’s expense for store insurance.
The Note was borrowed on February 1, 2018 and holds interest of 3%. Interest is accrued and not paid at the end of each month (N/12). The first annual principle payment, $1,600, is due in the month of June.
GCI wrote off $15,000 of bad debt at the end of the month, and then used the aging of receivables method to estimate the allowance for doubtful accounts to be $15,000
All depreciation is straight-line with no residual value. Office equipment is expected to last 8 years Factory Equipment is expected to last 3 years Mixing barrels are expected to last 5 years.
Assume the income tax rate for GCI is 30%.
CHART OF ACCOUNTS
101
Cash
230
Interest Payable
106
Accounts Receivable
301
Common Stock
110
Allowance For Doubtful Accounts
350
Retained Earnings
126
Inventory
405
Sales Revenue
128
Prepaid Insurance
406
Sales Discounts and Allowance
131
Prepaid Rent
501
Cost of Goods Sold
135
Prepaid Advertising
520
Utility Expense
163
Office Equipment
525
Wage Expense
164
Mixing Barrels
530
Interest Expense
165
Factory Equipment
535
Rent expense
190
Accumulated Depreciation
545
Insurance Expense
201
Accounts Payable
550
Bad Debt Expense
215
Notes Payable
560
Depreciation Expense
220
Line of Credit
565
Advertising Expense
225
Income Taxes Payable
570
Income Tax Expense
Explanation / Answer
. Journal entries
March 1
Cash. 25000
Office euip. 5760
To common stock 30760
Mar 1
Mixing barrels 3000
Factory euip. 3600
To accounts payable 6600
Mar 1
Inventory. 72000
To accounts payable. 72000
Mar 1
Accounts payable 20000
To cash 20000
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