Question

Prepare journal entries.

The following transactions occurred during the first twelve months of operations:
January 1st	Common stock is issued in exchange for cash in the amount of ………….………….………………………								295,000
February 8th	The company purchases and pays for 160 units of gourmet dog food at a price of $25 per unit …………..								4,000
March 1st	The company pays cash for a one-year insurance policy in the amount of ……………….………………………..…..								9,300
March 31st	Rent on a retail space for 12 months is paid in the amount of …..……….………………………………………								12,480
April 1st	Grooming and boarding equipment with a useful life of 2 years is purchased for cash in the amount of ……								18,000
April 10th	Grooming supplies purchased on account in the amount of …………..……………………………………………								1,450
May 15th	The company purchases and pays for another 370 units of gourmet dog food at a price of $29 per unit …..								10,730
May 30th	Grooming services are performed on account in the amount of …………………………………………………………..…………								13,625
June 1st	The company pays for advertisements to be run for the next 12 months in the amount of ……………………….								864
June 30th	The company issues a 5-year bond with a face value of $100,000 and a stated annual rate of 6%.
	Interest is due on June 30th each year. The market rate is 8% on the date of issuance …………………………….								100,000
July 25th	Dog-walking services are performed on account in the amount of …...……………………………..…………								14,225
July 31st	95 units of gourmet dog food are sold for $70 per unit with terms 2/10, n/30. The sale is recorded using
	the gross method in the amount of (see note c for cost flow assumptions) …………………………………………………………………………………….								6,650
August 2nd	Boarding services are provided on account in the amount of ……………………………………………………………….								6,280
August 6th	The company receives full payment from the customer for the July 31st sale ………………………………………								6,517
September 15th	Pet sitting services are performed on account in the amount of ……………………..…………………………….…………..								6,245
September 29th	Customer payments are received for services previously provided in the amount of ………………………………..								1,250
October 13th	100 units of gourmet dog food are sold for $73 per unit with terms 2/10, n/30. The sale is recorded using
	the gross method in the amount of ……………………………………………………………………………………….								7,300
October 29th	The company receives payment for half of the October 13th sale ………………………………………………………								3,650
November 1st	Equipment originally purchased on April 1st for $2400 is sold for $2000 cash
November 15th	A bookkeeper is hired to help the company with daily accounting taxes and annual tax preparation
December 15th	The bookkeeper is paid $3,500 for the previous month's services								3,500

Additional information:
Grooming supplies on hand at the end of the month are as follows: …………………………………….							870
The year-end balance reported at the end of the year for the Allowance for Doubtful Accounts
is estimated as 4% of outstanding receivables at the end of the year
The Company uses a perpetual inventory system and accounts for costs using the First-In-First-Out cost
flow assumption. On December 31st, a count of ending inventory reveals that there are 335 bags of dog
food on hand.
All revenue is recorded in the "Sales Revenue" account and reported net of cash discounts on the income statement.
The effective interest method is used to amortize bond premiums and discounts
Adjustments are made at the end of the year for prepaid insurance, rent, advertising, depreciation, and interest expense.
The bookkeeper is paid a salary of $3,500 on the 15th of every month.
The company declared dividends of $650 for the year
Assume selling expenses include advertising and supplies expense. All other expenses, other than depreciation
and interest expense, are considered general & administrative.

Answer 1

Journal Entries for first twelve months of operation:-

Date	Account Title	Debit	Credit
Jan 1	Cash A/c	295000
	To, Common Stock		295000
	(Being common stock issued in exchange of cash)
Feb 8	Purchase A/c	4000
	To. Cash		4000
	(Being purchases made of 160 units of gourmet dog food)
March1	Insurance A/c	9300
	To,Cash		9300
	( Being insurance premium paid)
Dec31	Prepaid Insurance A/c	7750
	To, Insurance		7750
	(Being insurance premium for 10 months paid in advance)
	[(9300/12)*10]
March31	Rent A/c	12480
	To. Cash		12480
	(Being rent paid for 12 months period)
Dec 31	Prepaid Rent A/c	9360
	To, Rent		9360
	(Being prepaid rent paid for 9 months) [(12480/12)*9]
April1	Equipment A/c	18000
	To, Cash		18000
	( Being equipment purchased with useful life of 2 years)
Dec31	Accumulated Depreciation A/c	7800
	To, Equipment A/c		7800
	(Being equipment depreciated (18000-2400/2)
April 10	Supplies A/c	1450
	To, Cash		1450
	(Being grooming supplies purchased)
May 15	Purchase A/c	10730
	To, Cash		10730
	(Being purchases made of 370 units of gourmet dog food @29)
May 30	Customer A/c	13625
	To, Sales Revenue		13625
	( Being grooming services performed)
Jun1	Advertisement Expense A/c	864
	To, Cash		864
	(Being advertisement expense for 12 months paid)
Dec31	Prepaid Advertisement A/c	504
	To, Advertisement Expense		504
	( Being Prepaid Advertisement Expense adjusted)[(864/12)*7]
June 30
July 25	Customer A/c	14225
	To, Service Revenue		14225
	( Being dog walking services performed)
July 31	Customer A/c	6517
	Discount Allowed A/c	133
	To, Sales Revenue		6650
	( Being 95 units of gourmet dog food sold at 2% discount)
Aug 2	Customer A/c	6280
	To, Service Revenue		6280
	(Being boarding services performed)
Aug6	Cash A/c	6517
	To, Customer		6517
	( Being cash received on sales made)
Sep15	Customer A/c
	To, Service Revenue	6245
	(Being pet services performed)		6245
Sep29	Cash A/c	1250
	To, Customer		1250
	(Being customer payment received for services previously provided)
Oct13	Customer A/c	7154
	Discount Allowed A/c	146
	To, Sales Revenue		7300
	( Being 100 units of gourmet dog food sold at 2% discount @73)
Oct 29	Cash A/c	3650
	To, Customer		3650
	(Being half payment for Oct13 Sale received)
Nov1	Cash A/c	2000
	Loss on sale	400
	To, Equipment		2400
	(Being equipment sold)
Nov 15	General & Administrative Expense A/c	3500
	To, Outstanding General & Administrative Expense A/c		3500
	(Being expenses on book keeper due)
Dec 15	Outstanding General & Administrative Expense A/c	3500
	To, Cash		3500
	(Being Outstanding expenses paid)
Dec 31	Retained Earning A/c	$650
	To, Dividend Payable		$650
	(Being dividend declared)
Dec 31	Provision for Bad & Doubtful Debt A/c	1720
	To, Customer A/c		1720
	Net Balance of Customer/Debtor Account = 42989
	( Being provision made @4%)