Question

Exercise 4-7 Write journal entries LO 6 The transactions relating to the formation of Blue Co. Stores, Inc., and its first month of operations follow. a. The firm was organized and the stockholders invested cash of $7,700. b. The firm borrowed $5,500 from the bank; a short-term note was signed. c. Display cases and other store equipment costing $1,800 were purchased for cash. The original list price of the equipment was $1,980, but a discount was received because the seller was having a sale. d. A store location was rented, and $1,450 was paid for the first month's rent. e. Inventory of $14,200 was purchased; $8,200 cash was paid to the suppliers, and the balance will be paid within 45 days. f. During the first week of operations, merchandise that had cost $4,900 was sold for $5,600 cash. g. A newspaper ad costing $110 was arranged for; it ran during the second week of the store's operations. The ad will be paid for in the next month. h. Additional inventory costing $4,400 was purchased; cash of $1,150 was paid, and the balance is due in 30 days. i. In the last three weeks of the first month, sales totaled $15,000, of which $9,800 was sold on account. The cost of the goods sold totaled $8,300. j. Employee wages for the month totaled $1,800; these will be paid during the first week of the next month. k. The firm collected a total of $3,200 from the sales on account recorded in transaction i. l. The firm paid a total of $4,750 of the amount owed to suppliers from transaction e. Required: Prepare the journal entries for each of these transactions.

Answer 1

Solution:

Journal Entries - Blue Co. Stores, Inc.
Event	Particulars	Debit	Credit
a.	Cash Dr	$7,700.00
	To Common Stock		$7,700.00
	(Being stockholders invested cash))
b.	Cash A/c Dr	$5,500.00
	To Short-term Note Payable		$5,500.00
	(Being short term note was signed with bank)
c.	Store Equipment Dr	$1,980.00
	To Purchase discount		$180.00
	To Cash A/c		$1,800.00
	(Being equipment purchased for cash)
d.	Rent Expense Dr	$1,450.00
	To Cash A/c		$1,450.00
	(Being rent paid for a store location)
e.	Inventory Dr	$14,200.00
	To Accounts payables		$6,000.00
	To Cash A/c		$8,200.00
	(Being Inventory purchased)
f. (1)	Cash A/c Dr	$5,600.00
	To Sales Revenue		$5,600.00
	(Being Inventory sold)
f. (2)	Cost of Goods Sold Dr	$4,900.00
	To Inventory		$4,900.00
	(Being cost of good sold recorded)
g.	Advertisement Expense Dr	$110.00
	To Account Payables		$110.00
	(Being Ad cost recorded)
h.	Inventory Dr	$4,400.00
	To Accounts payable		$3,250.00
	To Cash A/c		$1,150.00
	(Being Inventory purchased)
i. (1)	Cash A/c Dr	$5,200.00
	Account Receivables Dr.	$9,800.00
	To Sales Revenue		$15,000.00
	(Being Inventory sold)
i. (2)	Cost of Goods Sold Dr	$8,300.00
	To Inventory		$8,300.00
	(Being cost of good sold recorded)
j.	Salary expenses Dr	$1,800.00
	To Salary payable		$1,800.00
	(Being rent paid for a store location)
k.	Cash A/c Dr	$3,200.00
	To Account Receivables		$3,200.00
	(Being cash collected from sales on account)
l.	Account Payables Dr	$4,750.00
	To Cash A/c		$4,750.00
	(Being payment made owed to suppliers)