In: Accounting
Three former college classmates have decided to pool a variety
of work experiences by opening a store near campus to sell wireless
equipment to students. The business has been incorporated as
University Wireless.
Required: Several transactions occurred in March.
Each is described separately in this folder. For each transaction,
indicate the accounts 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 YOU
WILL NOT RECEIVE 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 Cash impact first and the Inventory impact second because that is the order in which they are listed in the drop-down menu. If you record the Inventory impact first and the Cash impact second, even if they are the correct accounts and even if you have the correct dollar amounts, your answer will be considered incorrect.
- 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.
- 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, you MUST 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 transaction (8 tries for transaction #8).
- The entries for each transaction are worth 2 points (4 points for transaction #8).
Transaction 1
On March 1, the three classmates opened a checking account for The Wire at a local bank. They each deposited $22,000 in exchange for shares of stock. A few of their friends also purchased stock totaling $11,000 that was deposited in The Wire account.
Transaction 2
The company quickly acquired $35,000 in inventory, 30% of which was
acquired on open accounts that were payable after 30 days. The rest
was paid for in cash.
Account: Cash Accounts Receivable Inventory Prepaid Rent Fixtures and Equipment Accounts Payable Interest Payable Wages Payable Notes Payable Paid-in Capital Retained Earnings Leave Blank Dollar amount:
Transaction 3
A one-year store rental lease was signed on March 1 for $13,200 for
the year, and rent for the first 3 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.]
Account: Cash Accounts Receivable Inventory Prepaid Rent Fixtures and Equipment Accounts Payable Interest Payable Wages Payable Notes Payable Paid-in Capital Retained Earnings Leave Blank Dollar amount:
Transaction 4
The owners paid $4,000 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 $7,000 for some
advertising in local newspapers. [Note: Combine
both transactions into one entry].
Account: Cash Accounts Receivable Inventory Prepaid Rent Fixtures and Equipment Accounts Payable Interest Payable Wages Payable Notes Payable Paid-in Capital Retained Earnings Leave Blank Dollar amount:
Transaction 5
Sales were $70,000. Cost of merchandise sold was 60% of its sales
price. 65% of the sales were on open account.
[Note: Record the complete entry for the sales
first and the complete entry for the expenses second]
Account: Cash Accounts Receivable Inventory Prepaid Rent Fixtures and Equipment Accounts Payable Interest Payable Wages Payable Notes Payable Paid-in Capital Retained Earnings Leave Blank Dollar amount:
Transaction 6
Wages and salaries in March were $11,500, of which $8,200 was
actually paid to employees.
Account: Cash Accounts Receivable Inventory Prepaid Rent Fixtures and Equipment Accounts Payable Interest Payable Wages Payable Notes Payable Paid-in Capital Retained Earnings Leave Blank Dollar amount:
Transaction 7
Miscellaneous expenses were $1,900, all paid for with cash.
Account: Cash Accounts Receivable Inventory Prepaid Rent Fixtures and Equipment Accounts Payable Interest Payable Wages Payable Notes Payable Paid-in Capital Retained Earnings Leave Blank Dollar amount:
Transaction 8
On March 1, fixtures and equipment were purchased for $4,500 with a
downpayment of $2,000 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 9 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.]
Account: Cash Accounts Receivable Inventory Prepaid Rent Fixtures and Equipment Accounts Payable Interest Payable Wages Payable Notes Payable Paid-in Capital Retained Earnings Leave Blank Dollar amount:
Transaction 9
Cash dividends totaling $4,000 were paid to stockholders on March
31.
Account: Cash Accounts Receivable Inventory Prepaid Rent Fixtures and Equipment Accounts Payable Interest Payable Wages Payable Notes Payable Paid-in Capital Retained Earnings Leave Blank Dollar amount: