During the past several months, you have decided to make some changes in your li

Question

During the past several months, you have decided to make some changes in your life. You have always wanted to open your own small business and have decided you finally will. You have decided you will open your own merchandising business on January 1, 2016.

During your planning for this Grand Opening, you made the following decisions for your business.

You will fund the opening of your business with a transfer from your personal bank account to the business bank account in the amount of $20,000 on Jan 1.

You have already signed a lease for a building for a monthly rent of $1000 and your first rental payment is due on Jan 1.

You will use a Perpetual inventory system and the LIFO method to account for your inventory.

You will sell your product to all customers on account. Your terms for all customers are 2/10, n/30.

To start out, you don’t plan on hiring any employees.

Assignment

Statement of Owner’s Equity, Classified Balance Sheet

ACCOUNT TITLE 1 Cash DEBIT CREDIT $20,000.00 Capital $20,000.00 1,000.00 1 Rent Cash 1,000.00 1 Office Equipment $10,000.00 Cash $10,000.00 1 Inventory $ 4,000.00 Accounts Payable $ 4,000.00 2 Accounts Recievable $ 3,000.00 Sales Revenue $ 3,000.00 2 Cost of goods sold $ 2,000.00 Inventory $ 2,000.00 5 Office Supplies $ 1,000.00 Cash 1,000.00 2,940.00 60.00 9 Cash Discount Accounts Recievable $ 3,000.00 12 Inventory $ 4,000.00 Accounts Payable $ 4,000.00 15 Accounts Payable $ 4,000.00 Cash $ 4,000.00 16 Accounts Receivable $ 1,500.00 Sales Revenue 1,500.00 16 Cost of goods sold $ 1,100.00 Inventory 1,100.00 19 Office Expense $ 250.00 Cash $ 250.00 20 Adverisement Expense $ 100.00 Cash $ 100.00 27 Cash $ 1,500.00 Accounts Receivable 1,500.00 29 Accounts Receivable 4,500.00 Sales Revenue 4,500.00 30 Cost of goods sold 3,300.00 Inventory 3,300.00 30 Miscellaneous Expense $ 100.00 Cash $ 100.00 31 Telephone Expense $ 150.00 Cash $ 150.00 31 Electricity Expense $ 200.00 Cash $200.00 31 Depreciation $ 83.33 Accumulated Depreciation $ 83.33 31 Cost of goods sold $250.00 Office Supplies $ 250.00

Explanation / Answer

From the Journal Entries: Trial Balance

Working Note: Cash T Account

Income Statement

Statement of Owner's Equity

Balance Sheet

Account Title Debit Credit Cash (W.N.) 7640 Capital 20000 Rent 1000 Office Equipment 10000 Inventory 1600 Accounts Payable 4000 Accounts receivable 4500 Sales Revenue 9000 Cost of Goods Sold 6650 Office Supplies 750 Discount 60 Office Expense 250 Advertisement Expense 100 Miscellaneous Expenses 100 Telephone Expense 150 Electricity Expense 200 Depreciation 83.33 Accumulated Depreciation 83.33 Total 33083.33 33083.33

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