Question

Roth Inc. experienced the following transactions for Year 1, its first year of operations:

1. Issued common stock for $80,000 cash.
2. Purchased $245,000 of merchandise on account.
3. Sold merchandise that cost $166,000 for $330,000 on account.
4. Collected $276,000 cash from accounts receivable.
5. Paid $230,000 on accounts payable.
6. Paid $54,000 of salaries expense for the year.
7. Paid other operating expenses of $43,000.
8. Roth adjusted the accounts using the following information from an accounts receivable aging schedule:

  

Number of Days Past Due	Amount				Percent Likely to Be Uncollectible				Allowance Balance
Current	$	32,400				0.01
0−30		13,500				0.05
31−60		2,700				0.10
61−90		2,700				0.20
Over 90 days		2,700				0.50

Required
a. Record the above transactions in general journal form and post to T-accounts. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
  

Answer 1

Requirement a:

Journal Entries:

Transaction	Account title and explanation	Debit	Credit
1	Cash	$80,000
	Common stock		$80,000
	[To record issuance of common stock]
2	Inventory	$245,000
	Accounts payable		$245,000
	[To record purchase of inentory on account]
3	Accounts receivable	$330,000
	Sales revenue		$330,000
	[To record sales revenue]
	Cost of goods sold	$166,000
	Inventory		$166,000
	[To record cost of goods sold]
4	Cash	$276,000
	Accounts receivable		$276,000
	[To record collections from customers]
5	Accounts payable	$230,000
	Cash		$230,000
	[To record cash paid to suppliers]
6	Salaries expense	$54,000
	Cash		$54,000
	[To record payment of salaries]
7	Operating expenses	$43,000
	Cash		$43,000
	[To record payment of operating expenses]
8	Bad debt expense	$3,159
	Allowance for doubtful accounts		$3,159
	[To record bad debt expense]

Bad debt expense:

Number of Days	Amount		Percent Likely to		Allowance
Past Due		x	Be Uncollectible	=	Balance
Current	32,400	x	0.01	=	324
0−30	13,500	x	0.05	=	675
31−60	2,700	x	0.1	=	270
61−90	2,700	x	0.2	=	540
Over 90 days	2,700	x	0.5	=	1,350
Total					3,159

T-Accounts:

Cash
1.....	$80,000	5.....	$230,000
4	$276,000	6	$54,000
		7	$43,000
Accounts receivable
3	$330,000	4	$276,000
Allowance for doubtful accounts
		8	$3,159
Inventory
2	$245,000	3	$166,000
Accounts payable
5	$230,000	2	$245,000
Common stock
		1	$80,000
Sales revenue
		3	$330,000
Cost of goods sold
3	$166,000
Salaries expense
6	$54,000
Operating expense
7	$43,000
Bad debt expense
8	$3,159