Question

In: Accounting

Jan Wei owns a cycle store that sells equipment, clothing, and other accessories. During the month...

Jan Wei owns a cycle store that sells equipment, clothing, and other accessories. During the month of June, the following activities occurred:

1.The business earned $30,000 from the sale of bicycles, clothing, and accessories. Half the sales were for cash and the other half was on account.

2.The merchandise that was sold originally cost $17,400.

3.Jan purchased additional merchandise on credit for $20,800.

4.Jan paid $18,000 to the suppliers of the merchandise purchased above.

5.The telephone, electricity, and water bills for the month came to $430. All but one of these bills, for $130, was paid by the end of the month.

6.Additional expenses for the month, including depreciation expense of $600, totalled $2,100. They were all paid in cash, except the depreciation expense, and were for repairs and maintenance done to the store.

7.At the end of May, Jan had an 8% loan for $5,000 outstanding with the bank. On the last day of June, Jan paid the monthly interest that was owed on the loan, and also paid $500 on the loan principal.

8.On the last day of June, a customer ordered a $1,300 bicycle. Jan did not have it in stock, so it was ordered and will be delivered in July. Since it was a special order, the customer paid a $300 deposit on it.

Required

Referring to the concepts discussed so far in this textbook:

a.  

Prepare journal entries for each transaction or adjustment

b.  

Calculate the net income for the month.

Solutions

Expert Solution

Date Accont title and explanation Debit Credit
1 Cash $        15,000
Accounts receivable $        15,000
Sales revenue $        30,000
2 Cost of goods sold $        17,400
Inventory $        17,400
3 Inventory $        20,800
Accounts payable $        20,800
4 Accounts payable $        18,000
Cash $        18,000
5 Utilities expense $              430
Cash $              300
Utilities payable $              130
6 Repairs and maintenance expense $          1,500
Cash $          1,500
Depeciation expense $              600
Accumulated depreciation $              600
7 Interest expense(5000 x 8%*1/12) $                33
loan $              500
Cash $              533
8 Unearned sales revenue $              300
Cash $              300

b.

Income statement
For the month ended June
Sales $        30,000
Less: cost of goods sold            17,400
Gross Profit            12,600
Less: Operating expenses
Utilities expense                430
Repairs and maintenance expense            1,500
Depeciation expense                600
Interest expense                  33
Total operating expenses              2,563
Net Income $        10,037

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