Question

John and Lou Topp are brothers. In May 2016, they decided to form a Company, Top Dog, Inc. selling hot dogs. Required: Record the appropriate transactions and adjusting journal entries for Top Dog, Inc. The Company is on a perpetual inventory system. Write “N/A" if no entry is appropriate. (In a perpetual inventory system cost of goods sold and inventory amounts are adjusted for each sale vs a periodic system where inventory and cost of goods sold amounts are adjusted at the end of the year.) Hint 2- The general ledger accounts used by Top Dog, Inc. are as follows:

1-May 1, 2016 – John and Lou Topp invested $20,000 in the hot dog vending cart business by purchasing 2,000 shares of the common stock ($10 par value) of Top Dog, Inc.

2- May 1, 2016 – Top Dog, Inc. purchased a one year insurance policy in the amount of $2,400 beginning May 1, 2016 and expiring on April 30, 2017.

3-May 7, 2016 - Top Dog, Inc. purchased a hot dog stand for $10,000 for cash.

4-May 8, 2016 - Top Dog, Inc. purchased 1,000 hot dogs for $.20 each and 1,000 buns for $.05 each on account from Nathan’s Inc.

5-May 8, 2016 – Top Dog, Inc. purchased supplies from Nathans Inc. for $300 cash.

6-May 9, 2016 – Top Dog, Inc. hired two college students to work at the stand for $500 per week beginning on Monday, May 15.

7-May 15, 2016 – Top Dog, Inc. sells 900 hot dogs (and buns) for $3 each at a special event.

8-May 27, 2016 – Top Dog, Inc. pays their 2 employees in the amount of $2,000 for the prior two weeks of work. (ignore any payroll taxes).

9-May 31, 2016 – Top Dog, Inc. pays Nathans Inc. in full for the inventory purchased on May 8, 2016.

10-May 31, 2016 – Bank charges amounted to $15 for the month of May.

11-May 31, 2016 – A corporate customer paid Top Dog, Inc. $1,500 in advance for 500 hot dogs and buns to be delivered next week to a corporate sales event.

Month- End Adjustments – May

12- May 31, 2016 – Top Dog, Inc. depreciates the hot dog cart on a straight-line basis over 5 years.

13-May 31, 2016 – Top Dog Inc. adjusts the insurance account at month end for the premium paid on May 1, 2016.

14-May 31, 2016 – Rent for the cart space for May has not yet been paid in the amount of $200.

15-May 31, 2016 – May 31^st is a Tuesday, and Top Dog’s two employees are paid $1,000 each every other Friday for a 10 day work week – Monday thru Friday). (Note: The last payroll was paid on Friday, May 27^th)

16-Supplies on hand at the end of May amounted to $100.

	Equipment		Rent Expense		Prepaid Insurance
	Supplies Expense		Accounts Payable		Equipment
	Sales		Unearned (Deferred) Revenue		Accumulated Depreciation - Equipment
	Cash - Checking		Cost of Goods Sold		Salaries and Wages Payable
	Insurance Expense Accrued Expenses Payable		Salaries and Wages Expense Depreciation Expense		Bank Charges
	Inventory		Supplies (on Hand)		Common Stock Retained Earnings

Answer 1

JOURNAL ENTRIES IN THE BOOKS OF TOP DOG INC FOR THE MONTH OF MAY 2016

1) MAY1,2016 FOR ISSUE OF COMMON STOCK

.CASH A/C DR 20000

TO COMMON STOCK 20000

2) MAY1, 2016 FOR PURCHASE OF INSURANCE POLICY

PREPAID INSURANCE A/C DR 2400

TO CASH A/C 2400

3) MAY 7, 2016 FOR PURCHASE OF HOT DOG CART

EQUIPMENT (CART) A/C DR 10000

TO CASH A/C 10000

4) MAY 8, 2016 FOR PURCHASE OF HOT DOGS AND BUNS

INVENTORY A/C DR [(1000*0.2)+(1000*0.05)] 700

TO ACCOUNTS PAYABLE (NATHAN'S) 700

5) MAY 8, 2016 FOR PURCHASE OF SUPPLIES

SUPPLIES A/C DR 300

TO CASH A/C 300

6) N/A

7) MAY 15, 2016 FOR SALES OF HOT DOGS

CASH A/C DR (900*3) 2700

TO SALES A/C 2700

COST OF GOODS SOLD A/C DR (900*0.25) 225

TO INVENTORY A/C 225

8) MAY 27, 2016 FOR SALARY PAID

SALARY AND WAGES EXPENSE A/C DR 2000

TO CASH A/C 2000

9) MAY 31, 2016 FOR NATHAN'S ACCOUNT SETTLED

ACCOUNTS PAYABLE (NATHAN'S) DR 700

TO CASH A/C 700

10) MAY 31, 2016 FOR BANK CHARGES

BANK CHARGES A/C DR 15

TO BANK A/C 15

11) MAY 31, 2016 FOR ADVANCE RECIEVED

CASH/ BANK A/C DR 1500

TO UNEARNED REVENUE 1500

12) MAY 31, 2016 FOR DEPRECIATION

DEPRECIATION EXP A/C DR [ (10000/5)/12] 166.67

TO ACCUMULATED DEPRECIATION EQUIPMENT A/C 166.67

13) MAY 31, 2016 FOR INSURANCE EXP ADJUSTED FOR THE MONTH OF MAY

INSURANCE EXPENSE A/C DR 200

TO PREPAID INSURANCE A/C 200

14) MAY 31, 2016 FOR RENT ACRRUED

RENT EXP A/C DR 200

TO RENT PAYABLES A/C 200

15) MAY 31, 2016 FOR SALARY AND WAGES ACCRUED

SALARY AND WAGES EXP A/C DR 800

TO SALARY AND WAGES PAYABLE A/C 800

{(2000/10)*4DAYS}

16) SUPPLIES ON HAND (CLOSING STOCK) DR 100

TO COST OF GOODS SOLD 100