Exercise 4-7 Write journal entries LO 6 The transactions relating to the formati

Question

Exercise 4-7 Write journal entries LO 6 The transactions relating to the formation of Blue Co. Stores, Inc., and its first month of operations follow. a. The firm was organized and the stockholders invested cash of $7,700. b. The firm borrowed $5,500 from the bank; a short-term note was signed. c. Display cases and other store equipment costing $1,800 were purchased for cash. The original list price of the equipment was $1,980, but a discount was received because the seller was having a sale. d. A store location was rented, and $1,450 was paid for the first month's rent. e. Inventory of $14,200 was purchased; $8,200 cash was paid to the suppliers, and the balance will be paid within 45 days. f. During the first week of operations, merchandise that had cost $4,900 was sold for $5,600 cash. g. A newspaper ad costing $110 was arranged for; it ran during the second week of the store's operations. The ad will be paid for in the next month. h. Additional inventory costing $4,400 was purchased; cash of $1,150 was paid, and the balance is due in 30 days. i. In the last three weeks of the first month, sales totaled $15,000, of which $9,800 was sold on account. The cost of the goods sold totaled $8,300. j. Employee wages for the month totaled $1,800; these will be paid during the first week of the next month. k. The firm collected a total of $3,200 from the sales on account recorded in transaction i. l. The firm paid a total of $4,750 of the amount owed to suppliers from transaction e. Required: Prepare the journal entries for each of these transactions.

Explanation / Answer

Solution:

Journal Entries - Blue Co. Stores, Inc. Event Particulars Debit Credit a. Cash Dr $7,700.00       To Common Stock $7,700.00 (Being stockholders invested cash)) b. Cash A/c Dr $5,500.00       To Short-term Note Payable $5,500.00 (Being short term note was signed with bank) c. Store Equipment Dr $1,980.00       To Purchase discount $180.00       To Cash A/c $1,800.00 (Being equipment purchased for cash) d. Rent Expense Dr $1,450.00       To Cash A/c $1,450.00 (Being rent paid for a store location) e. Inventory Dr $14,200.00       To Accounts payables $6,000.00       To Cash A/c $8,200.00 (Being Inventory purchased) f. (1) Cash A/c Dr $5,600.00       To Sales Revenue $5,600.00 (Being Inventory sold) f. (2) Cost of Goods Sold Dr $4,900.00       To Inventory $4,900.00 (Being cost of good sold recorded) g. Advertisement Expense Dr $110.00       To Account Payables $110.00 (Being Ad cost recorded) h. Inventory Dr $4,400.00       To Accounts payable $3,250.00       To Cash A/c $1,150.00 (Being Inventory purchased) i. (1) Cash A/c Dr $5,200.00 Account Receivables Dr. $9,800.00       To Sales Revenue $15,000.00 (Being Inventory sold) i. (2) Cost of Goods Sold Dr $8,300.00       To Inventory $8,300.00 (Being cost of good sold recorded) j. Salary expenses Dr $1,800.00       To Salary payable $1,800.00 (Being rent paid for a store location) k. Cash A/c Dr $3,200.00       To Account Receivables $3,200.00 (Being cash collected from sales on account) l. Account Payables Dr $4,750.00       To Cash A/c $4,750.00 (Being payment made owed to suppliers)

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