Question

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.

There are several transactions occurred in March. For each transaction, indicate the accounts that are affected, whether they increase or decrease, and the amount of the increase or decrease.

Possible account type: Cash, Accounts Receivable, Inventory, Prepaid Rent, Fixtures and Equipment, Accounts Payable, Interest Payable, Wages Payable, Notes Payable, Paid-in Capital, Retained Earnings

Transaction 1: On March 1, the three classmates opened a checking account for The Wire at a local bank. They each deposited $23,000 in exchange for shares of stock. A few of their friends also purchased stock for $13,000 that was deposited in The Wire account.

Transaction 2: The company quickly acquired $43,000 in inventory, 60% of which was acquired on open accounts that were payable after 30 days. The rest was paid for in cash.

Transaction 3: A one-year store rental lease was signed on March 1 for $1,200 per month, 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 $6,000 for some advertising in local newspapers. (Note: Combine both transactions into one entry.)

Transaction 5: Sales were $60,000. Cost of merchandise sold was 70% of sales. 25% of 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 $10,300, of which $8,000 was actually paid to employees.

Transaction 7: Miscellaneous expenses were $1,000, all paid for with cash.

Transaction 8: On March 1, fixtures and equipment were purchased for $4,000 with a downpayment of $1,000 and a $3,000 note, payable in one year. Interest of 5% 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.)

Transaction 9: Cash dividends totaling $3,400 were paid to stockholders on March 31.

Answer 1

1
Account	Dollar amount
Cash	82000	=(23000*3)+13000
Paid in capital	82000
Select leave blank for other columns
2
Account	Dollar amount
Cash	-17200
Inventory	43000
Accounts Payable	25800	=43000*60%
Select leave blank for other columns
3
Account	Dollar amount
Cash	-4800
Prepaid rent	4800
Prepaid rent	-1200
Retained earnings	-1200
Leave Blank
4
Account	Dollar amount
Cash	-8000	=2000+6000
Retained earnings	-8000
Select leave blank for other columns
5
Account	Dollar amount
Cash	15000	=60000*25%
Accounts Receivable	45000
Retained earnings	60000
Inventory	-42000	=60000*70%
Retained earnings	-42000
Leave Blank
6
Account	Dollar amount
Cash	-8000
Wages payable	2300
Retained earnings	-10300
Leave Blank
Leave Blank
7
Account	Dollar amount
Cash	-1000
Retained earnings	-1000
Leave Blank
Leave Blank
8
Account	Dollar amount
Cash	-1000
Fixtures and Equipment	4000
Notes Payable	3000
Fixtures and Equipment	-37.04	=4000/9/12
Retained earnings	-37.04
Interest Payable	12.50	=3000*5%/12
Retained earnings	-12.50
Leave Blank
9
Account	Dollar amount
Cash	-3400
Retained earnings	-3400
Select leave blank for other columns