July 1: You take $10,000 from your personal savings account and buy common stock
ID: 2546994 • Letter: J
Question
July 1: You take $10,000 from your personal savings account and buy common stock in Peyton Approved. July 1: Purchase $6,500 in baking supplies from vendor, on account. July 3: Your parents lend the company $10,000 cash in exchange for a two-year, 6% note payable. Interest and the principal are repayable at maturity. July 7: Enter into a lease agreement for bakery space. The agreement is for 1 year. The rent is $1,500 per month, and the last month’s rent payment of $1,500 is required at time of lease agreement. The payment was made in cash. Lease period is effective July 1, 2018, through June 30, 2019. July 10: Pay $375 to the county for a business license. July 11: Purchase a cash register for $250 (deemed to be not material enough to qualify as depreciable equipment—use misc. exp.). July 13: You have baking equipment, including an oven and mixer, which you have been using for your home-based business and will now start using in the bakery. You estimate that the equipment is currently worth $6,000, and you transfer the equipment into the business in exchange for additional common stock. The equipment has a 5-year useful life. July 13: Pay $200 for business cards/flyers/posters/ads to use for advertising. July 14: Pay $300 for office supplies. July 15: Hire part-time helper to be paid $12 per hour. Pay periods are the 1st through the 15th and 16th through the end of the month, with paydays being the 20th for the first pay period and the 5th of the following month for the second pay period. (No entry is required on this date; it is here for informational purposes only.) July 30: Received telephone bill for July in amount of $75. Payment is due on August 10. July 31: Pay $2,400 for a 12-month insurance policy. Policy effective dates are August 1, 2018, through July 31, 2019. July 31: Accrue wages earned for employee for period of 16th through 31st of July (Wage calculations table provided below)July 31: Total July bakery sales were $15,000. $5,000 of these sales are on accounts receivable. Step Two Data (Click on the link to return to the prompt.) The following events occur in August, 2018: August 5: Paid employee for period ending 7/31. August 8: Receive payments from customers towards accounts receivable in amount of $3,800. August 10: Paid July telephone bill. August 15: Purchase additional baking supplies in amount of $5,000 from vendor, on account. August 15: Accrue wages earned for employee from period of 1st through 15th of August (Wage calculations table provided below). August 15: Pay rent on bakery space. August 18: Receive payments from customers towards accounts receivable in amount of $3,000. August 20: Paid $8,500 toward baking supplies vendor payable. August 20: Pay employee for period ending 8/15. August 22: $300 in office supplies purchased. August 31: Received telephone bill for August in amount of $75. Payment is due on September 10. August 31: Accrue wages earned for employee for period of August 16th through August 31st. August 31: August bakery sales total $20,000. $7,500 of this total is on accounts receivable. Step Three (Click on the link to return to the prompt.) Updated Scenario: Many customers have been asking for more hypoallergenic products, so in September you start carrying a line of hypoallergenic shampoos on a trial basis. The following information relates to the purchase and sales of the shampoo: • You use the perpetual inventory method. You are uncertain as to which valuation method to use—FIFO, LIFO, or weighted average, so you calculate inventory using all three and then decide which one you would like to choose. Data: The following events occur in September, 2018: September 1: Paid dividends to self in amount of $10,000. September 5: Pay employee for period ending 8/31. September 7: Purchase merchandise for resale. See “Inventory Valuation” tab for details. September 8: Receive payments from customers toward accounts receivable in amount of $4,000. September 10: Pay August telephone bill. September 11: Purchase baking supplies in amount of $7,000 from vendor on account. September 13: Paid on supplies vendor account in amount of $5,000. September 15: Accrue employee wages for period of September 1 through September 15. September 15: Pay rent on bakery space: $1,500. September 15: Record merchandise sales transaction. See “Inventory Valuation” tab for details. September 15: Record impact of sales transaction on COGS and the inventory asset. See “Inventory Valuation” tab for details. September 20: Pay employee for period ending 9/15. September 20: Purchase merchandise inventory for resale to customers. See “Inventory Valuation” tab for details. September 24: Record sales of merchandise to customers. See “Inventory Valuation” tab for details.September 24: Record impact of sales transaction on COGS and the inventory asset. See “Inventory Valuation” tab for details. September 30: Purchase merchandise inventory for resale to customers. See “Inventory Valuation” tab for details. September 30: Accrue employee wages for period of September 16th through September 30th September 30: Total September bakery sales are $20,000. $6,000 of these sales are on accounts receivable. On September 30, the following adjustments must be made: • [Note: This is a sample.] Depreciation of baking equipment transferred to company on 7/13. Assume a half month of depreciation in July using the straight-line method. • Accrue interest for note payable. Assume a full month of interest for July. (6% annual interest on $10,000 loan from parents.) • Record insurance used for the year. • Actual baking supplies on-hand as of September 30 are $1,100. • Miscellaneous supplies on-hand as of September 30 are $50.
Month hours rate pay jul 31 10 12 120 15 aug 40 12 480 31 august 35 12 420 15 sept 38 12 456 30 sept 40 12 480
Explanation / Answer
PEYTON APPROVED General journal for the period from Juy.1 to Sept.30 Date Acount Title Debit Credit July.1 Cash 10000 Common Stock 10000 (Common stock bought with cash) July.1 Baking Supplies 6500 Accounts Payable 6500 (Purchase of baking supplies on account) July.3 Cash 10000 6% Note Payable 10000 (Cash borrowed on note) July.7 Prepaid Rent 1500 Cash 1500 (Rent paid for last month of the agreement) July.10 Licensing fee 375 Cash 375 (Licensing fee paid to council) July.11 Misc.Expense 250 Cash 250 (Purchase of cash register) July.13 Baking Equipment 6000 Common Stock 6000 (Baking equipment used for business) July.13 Advertising expense 200 Cash 200 (Cash paid for business cards etc. For advertising) July.14 Office Supplies 300 Cash 300 (purchase of iffice supplies for cash) July.15 No entry required July.30 Telephine expense 75 Accounts Payable 75 (Telephone bill for July) July.31 Prepaid Insurance 2400 Cash 2400 (One-year insurance purchased) July.31 Salaries expense 120 Salaries payable 120 (Salaries accrued for July) July.31 Cash 10000 Accounts Receivable 5000 Sales 15000 (Sales for the month of July) Aug.5 Salaries payable 120 Cash 120 (Payment of salaries for July) Aug.8 Cash 3800 Accounts Receivable 3800 (Cash collected from customers on account) Aug.10 Accounts Payable 75 Cash 75 (Payment of July telephone bill) Aug.15 Baking Supplies 5000 Accounts Payable 5000 (Purchase of baking supplies on account) Aug.15 Salaries expense 480 Salaries payable 480 (Salary for first two weeks of August ) Aug.15 Rent Expense 1500 Cash 1500 (Payment of rent ) Aug.18 Cash 3000 Accounts Receivable 3000 (Cash collected from customers on account) Aug.20 Accounts Payable 8500 Cash 8500 (Pyament to supplier on acount) Aug.20 Salaries payable 480 Cash 480 (Payment of accrued salaries for August) Aug.22 Office Supplies 300 Cash 300 (Purchase of office supplies on cash) Aug.31 Telephine expense 75 Accounts Payable 75 (Telephone bill for August) Aug.31 Salaries expense 420 Salaries payable 420 (Salaries accrued for two weeks of August) Aug.31 Cash 12500 Accounts Receivable 7500 Sales 20000 (Sales for August) Sept.1 Dividend 10000 Cash 10000 (Dividend paid ) Sept.5 Salaries payable 420 Cash 420 (Payment of salaries for August) Sept.8 Cash 4000 Accounts Receivable 4000 (Collection fro customers on account) Sept.10 Accounts Payable 75 Cash 75 (Payment of August telephone bill) Sept.11 Baking Supplies 7000 Accounts Payable 7000 (Purchase of baking supplies on account) Sept.13 Accounts Payable 5000 Cash 5000 (Payment to suppliers on account) Sept.15 Salaries expense 456 Salaries payable 456 (Salary for two weeks of Sept.) Sept.15 Rent Expense 1500 Cash 1500 (Payment of rent ) Sept.20 Salaries payable 456 Cash 456 (Salaries paid for two weeks of sept.) Sept.30 Salaries expense 480 Salaries payable 480 (Salaries for last two weeks of Sept.) Sept.30 Cash 14000 Accounts Receivable 6000 Sales 20000 (Sales for Sept.) Sept.30 Depreciation expense 250 Accumulated depreciation - bakery equipment 250 (Depreciation on equipment for 2 1/2 months) Sept.30 Interest Expense 150 Interest Payable 150 (Interest expense on note payable @6% p.a. for 3 months) Sept.30 Insurance expense 400 Prepaid Insurance 400 (Insurance expense for 2months @$200 per month) Sept.30 Baking Supplies Expense 17400 Baking supplies 17400 (Baking supplies used during the period) Sept.30 Office Supplies Expense 550 Office Supplies 550 (Office supplies used)
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