In: Accounting
Price for Services Provided |
Customers are charged $91 per hour for services rendered |
Sales Price of Retail Product |
Customers are charged $65 for each unit purchased |
Cost of Inventory for Products Purchased |
Inventory can be purchased for $30 per unit |
Record the following transactions in the General Journal.
Trans. |
Date |
Description |
1 |
Dec. 1 |
Borrow $128,250 from the local bank and signed a five-year installment note with payments of $2,600 at the end of each month beginning December 31. The annual interest rate is 8%. Current portion of the note payable at year end after December payment = $21,875 |
2 |
Dec. 1 |
Purchase a vehicle necessary for business operations for $7,400 cash. The vehicle has a six-year life with a residual value of $200 |
3 |
Dec. 1 |
Issue 15,000 shares of no-par value common stock for $5 per share to obtain the funds necessary to start your business. |
4 |
Dec. 1 |
Paid $18,000 for one year of insurance in advance. |
5 |
Dec. 1 |
Purchased a building for $50,000. Paid $2,000 in back taxes; $2,000 in realty fees. It has a 25-year useful life with residual value of $6,000. |
6 |
Dec. 3 |
Purchase supplies on account, $5,000. |
7 |
Dec. 3 |
Purchase 300 units of inventory with terms 2/10 net 30. |
8 |
Dec. 6 |
Provide 28 hours of services to customers for cash (calculate using your hourly service rate) no terms specified. |
9 |
Dec. 10 |
Sell 150 units of inventory on account. (Perpetual method = 2 entries) |
10 |
Dec. 12 |
Company pays invoice for inventory purchased on December 3rd within discount terms. (perpetual method) |
11 |
Dec. 15 |
Sell 50 units of inventory to a customer on account with a sales discount of 4/10, n/30. (Perpetual method= 2 entries) |
12 |
Dec. 20 |
The customer who purchased product on December 15th pays the amount due (within discount period). |
13 |
Dec. 23 |
Receive cash in advance for 27 hours of services to be completed in the future. |
14 |
Dec. 25 |
Purchase an additional 250 units of inventory for cash. |
15 |
Dec. 31 |
Sell 200 units of inventory to a customer who signs a 6-month promissory note at 12% interest for the balance due. This note originated end of month so no interest would be accrued. (perpetual method = 2 entries) |
16 |
Dec. 31 |
Pay employee salaries, $5,000. |
17 |
Dec. 31 |
Pay cash dividends to shareholders of $0.05 per share. |
18 |
Dec. 31 |
Vehicle did not meet expectations sold back to dealership for $7,000. (Record depreciation at date of sale and then record sale). |
19 |
Dec. 31 |
Record the $2,600 installment payment on the $128,250 installment note borrowed on December 1st. The annual interest rate is 8%. |
Solution
Entries in the General Journal
Transaction |
Date |
Account Titles and Explanation |
Ref. Post |
Debit |
Credit |
1 |
Dec-01 |
Cash |
$128,250 |
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Notes Payable |
$128,250 |
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(To record amount borrowed by issue of 5-year installment note) |
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2 |
Dec-01 |
Vehicle |
$7,400 |
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Cash |
$7,400 |
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(To record purchase of vehicle) |
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3 |
Dec-01 |
Cash |
$75,000 |
||
Common Stock |
$75,000 |
||||
(To record issue of 15,000 shares at $5 each) |
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4 |
Dec-01 |
Prepaid Insurance |
$18,000 |
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Cash |
$18,000 |
||||
(To record insurance paid in advance for 1 year) |
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5 |
Dec-01 |
Building |
$54,000 |
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Cash |
$54,000 |
||||
(To record purchase of building, cost 50,000 + taxes 2,000 + realty fees 2,000) |
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6 |
Dec-03 |
Supplies |
$5,000 |
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Accounts Payable |
$5,000 |
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(To record purchase of supplies on account) |
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7 |
Dec-03 |
Inventory |
$9,000 |
||
Accounts Payable |
$9,000 |
||||
(To record purchase of inventory 300 units at $30 per unit, on account) |
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8 |
Dec-06 |
Cash |
$2,548 |
||
Service Revenue |
$2,548 |
||||
(To record services provided, 28 hours at $91 per hour) |
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9 |
Dec-10 |
Accounts Receivable |
$9,750 |
||
Sales Revenue |
$9,750 |
||||
(To record credit sales of 150 units at $65 per unit) |
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Dec-10 |
Cost of Goods Sold |
$4,500 |
|||
Inventory |
$4,500 |
||||
(To record cost of goods sold, 150 units x $30) |
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10 |
Dec-12 |
Accounts Payable |
$9,000 |
||
Merchandise Inventory |
$180 |
||||
Cash |
$8,820 |
||||
(To record payment for inventory less 2% discount - 9,000 x 2% = 180, net cash payment = 8,820) |
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11 |
Dec-15 |
Accounts Receivable |
$3,250 |
||
Sales Revenue |
$3,250 |
||||
(To record credit sales of 50 units at $65 per unit) |
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Dec-15 |
Cost of Goods Sold |
$1500 |
|||
Inventory |
$1,500 |
||||
(To record cost of goods sold, 50 x $30) |
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12 |
Dec-20 |
Sales Discount |
$130 |
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Cash |
$3,120 |
||||
Accounts Receivable |
$3,250 |
||||
(To record payment received from customer with 4% cash discount; 3,250 x 4% = 130; cash = 3,250 - 130 = 3,120) |
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13 |
Dec-23 |
Cash |
$2,457 |
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Unearned Service Revenue |
$2,457 |
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(To record cash received in advance for 27 hours of service at $91 per hour) |
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14 |
Dec-25 |
Inventory |
$7,500 |
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Cash |
$7,500 |
||||
(To record purchase of inventory, 250 units at $30 for cash) |
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15 |
Dec-31 |
Notes Receivable |
$13,000 |
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Sales |
$13,000 |
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(To record sale of 200 units at $65 per unit; for a 6-month promissory note) |
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Dec-31 |
Cost of Goods Sold |
$6,000 |
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Inventory |
$6,000 |
||||
(To record cost of goods sold, 200 units at $30 each) |
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16 |
Dec-31 |
Salaries Expense |
$5,000 |
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Cash |
$5,000 |
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(To record payment of salaries) |
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17 |
Dec-31 |
Dividends |
$750 |
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Cash |
$750 |
||||
(To record payment of dividend of $0.05 per share on 15,000 shares) |
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18 |
Dec-31 |
Depreciation Expense – Vehicle |
$100 |
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Accumulated Depreciation - Vehicle |
$100 |
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(To record depreciation for the month of December on vehicle; (7,400 -200) x 1/6 x 1/12 = $100) |
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Dec-31 |
Cash |
$7,000 |
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Accumulated Depreciation - Vehicle |
$100 |
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Loss on Sale of Vehicle |
$300 |
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Vehicle |
$7,400 |
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(To record sale of vehicle for $7,000 and the resulting loss) |
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19 |
Dec-31 |
Notes Payable |
$2,600 |
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Interest Expense |
$855 |
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cash |
$3,455 |
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(To record payment of monthly interest on note and monthly payment; interest = 128,250 x 8% x 1/12 = 855) |
Computations:
Loss on vehicle –
Cost = $7,400
Depreciation = (7,400 – 200) x 1/6 x 1/12 = $100
Book value at Dec 31 = 7,400 – 100 = 7,300
Sale proceeds = $7,000
Loss on sale = 7,300 – 7,000 = $300