Question

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.

Instructions:

1. 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.

2.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.

3.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).

Transaction 2
The company quickly acquired $36,000 in inventory, 60% of which was paid for in cash. The rest was acquired on open accounts that were payable after 30 days

Transaction 3
A one-year store rental lease was signed on March 1 for $12,000 for the year, and rent for the first 4 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.]

Transaction 4
The owners paid $2,000 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 $5,500 for some advertising in local newspapers. [Note: Combine both transactions into one entry].

Transaction 5
Sales were $72,000. Cost of merchandise sold was 65% of its sales price. 30% of the sales were for cash. [Note: Record the complete entry for the sales first and the complete entry for the expenses second]

Transaction 6
Wages and salaries in March were $11,800, of which $8,400 was actually paid to employees.

Transaction 7
Miscellaneous expenses were $1,500, all paid for with cash.

Transaction 8
On March 1, fixtures and equipment were purchased for $6,000 with a downpayment of $1,000 and a $5,000 note, payable in one year. Interest of 7% per year was due when the note was repaid. The estimated life of the fixtures and equipment is 11 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.]

Answer 1

2
Account	Dollar amount
Cash	-21600	=36000*60%
Inventory	36000
Accounts Payable	14400
3
Account	Dollar amount
Cash	-4000
Prepaid rent	4000
Prepaid rent	-1000
Retained earnings	-1000
4
Account	Dollar amount
Cash	-7500
Retained earnings	-7500
5
Account	Dollar amount
Cash	21600	=72000*30%
Accounts Receivable	50400
Retained earnings	72000
Inventory	-46800	=72000*65%
Retained earnings	-46800
6
Account	Dollar amount
Cash	-8400
Wages payable	3400
Retained earnings	-11800
7
Account	Dollar amount
Cash	-1500
Retained earnings	-1500
8
Account	Dollar amount
Cash	-1000
Fixtures and Equipment	6000
Notes Payable	5000
Fixtures and Equipment	-45.45	=6000/11/12
Retained earnings	-45.45
Interest Payable	29.17	=5000*7%/12
Retained earnings	-29.17