Question

Record the Elijah's Home Furnishings transactions in its general journal.  The company uses a perpetual inventory system.

June 1             Started business by issuing 100,000 shares of $1 par value per share common stock for $100,000.

June 1             Paid $4,500 to rent store space for the months of June, July and August

June 1             Purchased $32,000 of display equipment by paying $10,000 cash and by signing for the balance a three month note, payable in the amount of $22,000 on September 1. The note requires Elijah’s to pay interest at an annual rate of 12%.

June 2             Paid $1,000 for store supplies.

June 3             Purchased $30,000 of merchandise on account, terms 2/10, n/30, FOB destination.

June 4             Paid $500 for the delivery of merchandise purchased on June 3.

June 5           Returned merchandise purchased on June 3 for credit, $3,000

June 7             Paid $1,500 to advertise the business for June.

June 13          Paid the balance due to the seller for purchase of merchandise on June 03, less the discount.

June 17          Sold merchandise on credit for $28,000 (cost $20,000), terms 2/10, n/30, FOB shipping point.

June 18          Paid $600 for the delivery of merchandise sold on June 17.

June 20          Return of merchandise sold on June 17 accepted from the customer for full credit and returned to merchandise inventory, $1,400 (cost, $1,000)

June 21          Paid $100 for the delivery of merchandise returned on June 20.

June 26          Paid June telephone bill of $150.

June 27          Received payment in full from the customer for sale of merchandise on June 17, less the sales discount.

June 28          Purchased merchandise on credit for $5,000, terms 2/10, n/30, FOB destination.

June 29          Sold merchandise on credit for $10,000 (cost $6,000), terms 2/10, n/30, FOB shipping point.

Adjustments:

June 30          June’s prepaid rent has expired

June 30          Store supplies on hand were $300.

June 30          Accrued salaries and wages for June amount to $2,000. Payment to the employees will be made on July 1.

June 30          Display equipment has an estimated used life of 60 months. The residual value of the display equipment is estimated to be $2,000.

June 30          Income taxes for June were estimated to be $600.  Taxes will be paid in July.

Required:

1. Journalize the transactions (explanations are not required).
2. Set up T-accounts and post the journal entries to T-accounts.
3. Prepare an unadjusted trial balance
4. Make the adjustments
5. Prepare an adjusted trial balance
6. Close all revenue/expense accounts to the income summary and then close the income summary to the retained earnings.
7. Prepare a multi-step income statement. All operating expenses are selling expenses.
8. Prepare a classified balance sheet.

Answer 1