Question

Set up following T – Accounts

Cash- ?

Accounts Receivable- 800,000

Allowance for bad debts- 100,000

Shoe Inventory-?

Supplies- 50,000

Prepaid Insurance- 10,000

Equipment- 1,000,000

Accumulated Depreciation Equipment- 400,000

Auto-100,000

Accumulated Depreciation - Auto- 75,000

Accounts Payable-80,000

Wages payable-?

Unearned Revenue- 40,00

note payable- 90,000

JHJ Common Stock- 2,000,000

JHJ Retained Earnings- 1,500,000

JHJ Dividends

Shoe Sales

Cost of Shoes Sold

Rent Expense

Supplies Expense

Depreciation Expense

Journalize the following transactions utilizing WEIGHTED AVERAGE inventory valuation method.

Invested additional $200,000 in business

paid $40,000 for supplies

purchased 100,000 pairs of shoes on account for $30 each

paid salaries for $3,000,000

purchased 200,000 pairs of shoes for $40 each

sold on account, 150,000 pairs of shoes at $60 each

withdrew 500,000

collections on accounts receivable $ 4,000,000

write off of uncollectible accounts $90,000

cash sales, 30,000 pairs of shoes at $70 each

paid $20,00 on note plus $10,000 interest

ending supplies 20,000

accrued salaries end of year 300,000

*equipment is depreciated utilizing straightline method and has 10 year life

*auto is now 3 years old and is depreciated utilizing double declining balance with 4 year life

*bad debt expense is estimated to be 20% if credit sales

*the company uses weighted average in calculating perpetual inventories and beginning inventories consisted of:

50,000 pairs of shoes at $20 each

50,000 pairs of shoes at $25 each

Required:

Journalize all entries

Post all entries to ledger.

Prepare trial balance

Prepare income statement

Prepare statement of retained earnings/ owner equity

Prepare balance sheet

prepare inventory chart

Prepare cash flow statement

Prepare closing entries and statement of cash flow

Answer 1

Ans. Journal entries of following transactions are as follows

Invested additional $200,000 in business = Cash A/c Dr $200,000

To Capital A/c Cr $200,000

paid $40,000 for supplies = Accounts payables A/c Dr $40,000

To Cash A/c Cr $40,000

purchased 100,000 pairs of shoes on account for $30 each = Purchases A/c Dr $30,00,000(100000*$30)

To Accounts payable Cr $30,00,000

paid salaries for $3,000,000 = Salary Payable A/c Dr $30,00,000

To Cash A/c Cr $30,00,000

purchased 200,000 pairs of shoes for $40 each = Purchases A/c Dr $80,00,000(200000*40)

To Accounts payable Cr $80,00,000

sold on account, 150,000 pairs of shoes at $60 each = Accounts receivables A/c Dr $90,00,000

To Sales A/c Cr $90,00,000

withdrew 500,000 = Drawings A/c Dr $500,000

To Cash A/c Cr $500,000

collections on accounts receivable $ 4,000,000 = Cash A/c Dr $40,00,000

To Accounts receivables Cr $40,00,000

write off of uncollectible accounts $90,000 = Bad debts A/c Dr $90,000

To Accounts receivables Cr $90,000

cash sales, 30,000 pairs of shoes at $70 each = Cash A/c Dr $21,00,000

To Sales A/c Cr $21,00,000

paid $20,00 on note plus $10,000 interest = Notes Payables A/c Dr $20,000

Interest A/c Dr $10,000

To Cash Cr $30,000

Lets discuss the depreciation entry of Equipment

Life = 10years , Method of Depreciation is Straight line method

Cost = $10,00,000

Depreciation = $10,00,000/10 = $100,000

Entry = Depreciation on equipment A/c Dr $100,000

To Accumulated dep. equipment A/c Cr $100,000

lets now calculate the depreciation on Auto

Cost = $100,000

Accumulated Dep = $75,000

Net Book value = $25,000

Rate of depreciation under double declining method = 100/4 = 25*2 = 50%

Depreciation = Net book value*rate of dep. = $25,000*50% = $12,500

Entry = Depreciation A/c Dr $12,500

To Accumulated dep. Auto Cr $12,500

At the time of closing depreciation would be transferred to Profit and Loss Account by entry

Profit & Loss A/c Dr $12,500

To depreciation Cr $12,500

Profit & Loss A/c Dr $100,000

To depreciation Cr $100,000