In: Accounting
Three former college classmates decided to open a store near
campus to sell wireless equipment to students. They created a
public company, The Wire, and issued stock to interested investors.
They plan on creating monthly financial statements.
Required: Several transactions occurred in March.
Each is described separately in this folder. For each transaction,
indicate the accounts for The Wire that are affected, whether they
increase or decrease, and the amount of the increase or
decrease.
YOU MUST FOLLOW THE INSTRUCTIONS BELOW. IF YOU DON'T, YOU MAY KNOW
THE CORRECT ENTRY BUT THE COMPUTER WILL NOT RECOGNIZE IT AND WILL
NOT GIVE YOU CREDIT.
After each transaction description, there are several "Account" submission boxes and corresponding "Amount" submission boxes. To indicate the accounts that you think are affected, choose them from the drop-down menu. But you MUST select them in the order that they are listed in the menu. FOR EXAMPLE, if you think that Cash and Inventory are affected by a particular transaction, you must record the effect on the Cash account first and the effect on the Inventory account second, since that is the order in which they are listed in the drop-down menu. If you record the Inventory effect first and the Cash effect second, even if they are the correct accounts with the correct dollar amounts, your answer will be considered wrong.
When you record the dollar amounts, be sure to use a minus sign to indicate a decrease in the account. You don't need to use a plus sign to indicate an increase. Also, don't use a dollar sign or spaces.
There are always more "Account" and "Amount" submission boxes available than are necessary. When you have indicated all the accounts that are affected by the transaction, select "Leave Blank" from the drop-down menu for EACH of the remaining "Account" submission boxes (you can leave the "Amount" boxes blank).
For transactions 3, 4, 5, and 8, you are given additional instructions. Read them carefully.
You get 5 tries for each complete entry.
The entries for transaction #8 is worth 4 points. The entries for each of the other transactions are worth 2 points.
Transaction 1
On March 1, the three classmates opened a checking account for The
Wire at a local bank. They each deposited $20,000 in exchange for
shares of stock. A few of their friends also purchased stock
totaling $14,000 that was deposited in The Wire account. (Options
for Account portion: Cash, Accounts Receivable, Inventory, Prepaid
Rent, Fixtures and Equipment, Accounts Payable, Interest Payable,
Wages Payable, Notes Payable, Paid-In Capital, Retained Earnings,
Leave Blank)
Account: Dollar amount:
Account: Dollar amount:
Account: Dollar amount:
Account: Dollar amount:
Account: Dollar amount:
Transaction 2
The company quickly acquired $37,000 in inventory, 50% of which was
acquired on open accounts that were payable after 30 days. The rest
was paid for in cash. (Options for Account portion: Cash, Accounts
Receivable, Inventory, Prepaid Rent, Fixtures and Equipment,
Accounts Payable, Interest Payable, Wages Payable, Notes Payable,
Paid-In Capital, Retained Earnings, Leave Blank)
Account: Dollar amount:
Account: Dollar amount:
Account: Dollar amount:
Account: Dollar amount:
Account: Dollar amount:
Transaction 3
A one-year store rental lease was signed on March 1 for $1,200 per
month, and rent for the first 2 months was paid in advance.
[Note: Record the complete entry for the March 1
transaction first and the complete adjusting entry on March 31
second.] Options for Account portion: Cash, Accounts Receivable,
Inventory, Prepaid Rent, Fixtures and Equipment, Accounts Payable,
Interest Payable, Wages Payable, Notes Payable, Paid-In Capital,
Retained Earnings, Leave Blank)
Account: Dollar amount:
Account: Dollar amount:
Account: Dollar amount:
Account: Dollar amount:
Account: Dollar amount:
Transaction 4
The owners paid $3,500 for website advertising. They were able to
get a good deal because one of the company's owners also owns stock
in the website company. The owners also paid $5,000 for some
advertising in local newspapers. [Note: Combine
both transactions into one entry]. Options for Account portion:
Cash, Accounts Receivable, Inventory, Prepaid Rent, Fixtures and
Equipment, Accounts Payable, Interest Payable, Wages Payable, Notes
Payable, Paid-In Capital, Retained Earnings, Leave Blank)
Account: Dollar amount:
Account: Dollar amount:
Account: Dollar amount:
Account: Dollar amount:
Account: Dollar amount:
Transaction 5
Sales were $78,000. Cost of merchandise sold was 75% of its sales
price. 60% of the sales were on open account.
[Note: Record the complete entry for the sales
first and the complete entry for the expenses second] Options for
Account portion: Cash, Accounts Receivable, Inventory, Prepaid
Rent, Fixtures and Equipment, Accounts Payable, Interest Payable,
Wages Payable, Notes Payable, Paid-In Capital, Retained Earnings,
Leave Blank)
Account: Dollar amount:
Account: Dollar amount:
Account: Dollar amount:
Account: Dollar amount:
Account: Dollar amount:
Transaction 6
Wages and salaries in March were $10,300, of which $8,200 was
actually paid to employees. Options for Account portion: Cash,
Accounts Receivable, Inventory, Prepaid Rent, Fixtures and
Equipment, Accounts Payable, Interest Payable, Wages Payable, Notes
Payable, Paid-In Capital, Retained Earnings, Leave Blank)
Account: Dollar amount:
Account: Dollar amount:
Account: Dollar amount:
Account: Dollar amount:
Account: Dollar amount:
Transaction 7
Miscellaneous expenses were $1,700, all paid for with cash. Options
for Account portion: Cash, Accounts Receivable, Inventory, Prepaid
Rent, Fixtures and Equipment, Accounts Payable, Interest Payable,
Wages Payable, Notes Payable, Paid-In Capital, Retained Earnings,
Leave Blank)
Account: Dollar amount:
Account: Dollar amount:
Account: Dollar amount:
Account: Dollar amount:
Account: Dollar amount:
Transaction 8
On March 1, fixtures and equipment were purchased for $4,000 with a
down payment of $1,500 and a $2,500 note, payable in one year.
Interest of 6% per year was due when the note was repaid. The
estimated life of the fixtures and equipment is 12 years with no
expected salvage value. [Note: Record the complete
entry for the March 1 equipment purchase first, the March 31
depreciation adjusting entry second, and the March 31 interest
adjusting entry third. Also, round all answers to
the nearest cent.] Options for Account portion: Cash, Accounts
Receivable, Inventory, Prepaid Rent, Fixtures and Equipment,
Accounts Payable, Interest Payable, Wages Payable, Notes Payable,
Paid-In Capital, Retained Earnings, Leave Blank)
Account: Dollar amount:
Account: Dollar amount:
Account: Dollar amount:
Account: Dollar amount:
Account: Dollar amount:
Account: Dollar amount:
Account: Dollar amount:
Account: Dollar amount:
Transaction 9
Cash dividends totaling $5,000 were paid to stockholders on March
31. Options for Account portion: Cash, Accounts Receivable,
Inventory, Prepaid Rent, Fixtures and Equipment, Accounts Payable,
Interest Payable, Wages Payable, Notes Payable, Paid-In Capital,
Retained Earnings, Leave Blank)
Account: Dollar amount:
Account: Dollar amount:
Account: Dollar amount:
Account: Dollar amount:
Account: Dollar amount:
1 | ||
Account | Dollar amount | |
Cash | 74000 | =(20000*3)+14000 |
Paid in capital | 74000 | |
2 | ||
Account | Dollar amount | |
Cash | -18500 | |
Inventory | 37000 | |
Accounts Payable | 18500 | |
3 | ||
Account | Dollar amount | |
Cash | -2400 | |
Prepaid rent | 2400 | |
Prepaid rent | -1200 | |
Retained earnings | -1200 | |
4 | ||
Account | Dollar amount | |
Cash | -8500 | |
Retained earnings | -8500 | |
5 | ||
Account | Dollar amount | |
Cash | 31200 | =78000*40% |
Accounts Receivable | 46800 | =78000*60% |
Retained earnings | 78000 | |
Inventory | -58500 | =78000*75% |
Retained earnings | -58500 | |
6 | ||
Account | Dollar amount | |
Cash | -8200 | |
Wages payable | 2100 | |
Retained earnings | -10300 | |
7 | ||
Account | Dollar amount | |
Cash | -1700 | |
Retained earnings | -1700 | |
8 | ||
Account | Dollar amount | |
Cash | -1500 | |
Fixtures and Equipment | 4000 | |
Notes Payable | 2500 | |
Fixtures and Equipment | -27.78 | =4000/12/12 |
Retained earnings | -27.78 | |
Interest Payable | 12.50 | =2500*6%/12 |
Retained earnings | -12.50 | |
9 | ||
Account | Dollar amount | |
Cash | -5000 | |
Retained earnings | -5000 | |