Question

1. Journalize the following business transactions in general journal form. Identify each transaction by number.

1. Stockholders invest $25,000 in cash in starting a real estate office operating as a corporation.

2. Purchased $500 of supplies on credit

3. Purchased Equipment for $15,000, paying $3,500 in cash and signed a 30 day, $11,500 note payable.

4. Real estate commissions billed to clients amount to $4,000

5. Paid $700 in cash for the currents month rent

6. Paid $250 cash on account for office supplies purchased in transaction 2

7. Received a bill for $800 for advertising for the current month

8. Paid $2,500 cash for office salaries

9. Paid $1,200 cash dividends to stockholders

10. Received a check for $2,000 from a client in payment on account for commissions billed in transaction 4

B) The following information is available for Best Buy Inc. for the Year ended 3/2/2012

Administrative Expenses	2,242
Cost Of Goods Sold	38,113
Gain On Sale of Investments	55
Gross Sales	50,523
Income Taxes	709
Interest Expense	134
Sales Returns	18
Selling Expenses	8242

Instructions: Using the above Information, calculate the following. Make sure to show all calculations.

1. Net Sales

2. Gross Profit

3. Income From Operations

4. Income Before Taxes

5. Net Income

Answer 1

A)	Journal Entries
	Event	Particulars			Debit	Credit
	1)	Cash			$ 25,000.00
		To Common Stock				$ 25,000.00
	2)	Supplies			$      500.00
		To Accounts Payable				$      500.00
	3)	Equipment			$ 15,000.00
		To Cash				$   3,500.00
		To Notes Payable				$ 11,500.00
	4)	Accounts Receivable			$   4,000.00
		To Commission Earned				$   4,000.00
	5)	Rent Expense			$      700.00
		To Cash				$      700.00
	6)	Accounts Payable			$      250.00
		To Cash				$      250.00
	7)	Advertising Expense			$      800.00
		To Accounts Payable				$      800.00
	8)	Office Salaries Expense			$   2,500.00
		To Cash				$   2,500.00
	9)	Cash Dividends			$   1,200.00
		To Cash				$   1,200.00
	10)	Cash			$   2,000.00
		To Accounts Receivable				$   2,000.00

B)
i)	Net Sales		=	Gross Sales - Sales Returns
			=	$ 50523 - $ 18
			=	$ 50,505.00
ii)	Gross Profit		=	Net Sales - Cost of Goods sold
			=	$ 50505 - $ 38113
			=	$ 12,392.00
iii)	Income from Operations		=	Gross Profit - Administrative Expense - Selling Expenses
			=	$ 12392 - $ 2242 - $ 8242
			=	$   1,908.00
iv)	Income before taxes		=	Income from Operations + Gain on sale of Investment - Interest Expense
			=	$ 1908 + $ 55 - $ 134
			=	$   1,829.00
v)	Net Income		=	Income before taxes - Income Taxes
			=	$ 1829 - $ 709
			=	$   1,120.00