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.

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.

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 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.
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.
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, 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).
4. For transactions 3, 4, 5, and 8, you are given additional instructions. Read them carefully.

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 for $13,000 that was deposited in The Wire account.

Transaction 2

The company quickly acquired $36,000 in inventory, 40% 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 $1,000 per month, 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.]

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 $6,500 for some advertising in local newspapers. [Note: Combine both transactions into one entry].

Transaction 5

Sales were $76,000. Cost of merchandise sold was 55% 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 $11,500, of which $8,000 was actually paid to employees.

Transaction 7

Miscellaneous expenses were $1,800, all paid for with cash.

Transaction 8

On March 1, fixtures and equipment were purchased for $6,000 with a downpayment of $1,500 and a $4,500 note, payable in one year. Interest of 5.5% per year was due when the note was repaid. The estimated life of the fixtures and equipment is 10 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 $5,000 were paid to stockholders on March 31.

Basic set up looks like this:

Account: Account: Account: Account: Account: Dolla

Account Options: Cash, Accounts Receivable, Inventory, Prepaid Rent, Fixtures and Equipment, Accounts Payable, Interest Payable, Wages Payable, Notes Payable, Paid-in Capital, Retained Earnings, Leave Blank

Answer 1

Date                Particular                                            Debit               Credit

1 March          Bank                                                    $25000

                        Share Capital                                                              $25000

(issued $25000 Common stock )

Date                Particular                                            Debit               Credit

March             Inventory                                             $36000

                        Cash                                                                            -$21600

                        Accounts Payable                                                       $14400

            (Bought inventory for cash and partly on credit with 30 days limit )

Date                Particular                                            Debit               Credit

1 March          Prepaid rent                                        $3000

Cash -$3000

            (Rent paid in advance)

Date                Particular                                            Debit               Credit

31 march         Rent expenses                                     $1000

                        Prepaid rent                                                                            -$1000

                        (Rent expenses due for the month of march)

Date                Particular                                            Debit               Credit

March      Website advertising                                 $4000

                   Newspaper advertising                     $6500

    Share capital                                                             $10500

                                (owners paid for advertising expenses)

Date                Particular                                            Debit               Credit

March          Cash                                                  $19000

                     Accounts Receivables                           $57000

Sales                                                                        $76000

                                (Sales made partly on credit)

Date                Particular                                            Debit               Credit

March                   cost of merchandise sold           $41800

                                Cash                                                      -$41800

                                ( Cost of merchandise sold $41800)

Date                Particular                                            Debit               Credit

March         Wages                                       $11500

                   Wages payable       3500

        Cash                 -$8000

                                ( Wages and salaries for march due and partly paid )

Date                Particular                                            Debit               Credit

March         Miscellaneous expenses                              $1800   

    Cash                                                                           -$1800

                                (miscellaneous expenses paid)

Date                Particular                                            Debit               Credit

March 1                Fixtures and Equipment                                $6000

                                Cash                                                                                                      -$1500

                                Notes payable                                                                                     $4500

                                (Purchased fixtures and equipment with a note)

Date                Particular                                            Debit               Credit

March 31             Depreciation                                                      $50

                                Fixtures and Equipment                                                                -$50

                                (Depreciation charged for the month march)

Date                Particular                                            Debit               Credit

March 31             Interest expenses                                           $20.63

                                Interest Payable                                                                               $20.63

                                (Depreciation charged for the month march)