Question

In: Accounting

Price for Services Provided Customers are charged $91 per hour for services rendered Sales Price of...

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%.

Solutions

Expert Solution

Solution

Entries in the General Journal

Transaction

Date

Account Titles and Explanation

Ref. Post

Debit

Credit

1

Dec-01

Cash

$128,250

Notes Payable

$128,250

(To record amount borrowed by issue of 5-year installment note)

2

Dec-01

Vehicle

$7,400

Cash

$7,400

(To record purchase of vehicle)

3

Dec-01

Cash

$75,000

Common Stock

$75,000

(To record issue of 15,000 shares at $5 each)

4

Dec-01

Prepaid Insurance

$18,000

Cash

$18,000

(To record insurance paid in advance for 1 year)

5

Dec-01

Building

$54,000

Cash

$54,000

(To record purchase of building, cost 50,000 + taxes 2,000 + realty fees 2,000)

6

Dec-03

Supplies

$5,000

Accounts Payable

$5,000

(To record purchase of supplies on account)

7

Dec-03

Inventory

$9,000

Accounts Payable

$9,000

(To record purchase of inventory 300 units at $30 per unit, on account)

8

Dec-06

Cash

$2,548

Service Revenue

$2,548

(To record services provided, 28 hours at $91 per hour)

9

Dec-10

Accounts Receivable

$9,750

Sales Revenue

$9,750

(To record credit sales of 150 units at $65 per unit)

Dec-10

Cost of Goods Sold

$4,500

Inventory

$4,500

(To record cost of goods sold, 150 units x $30)

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)

11

Dec-15

Accounts Receivable

$3,250

Sales Revenue

$3,250

(To record credit sales of 50 units at $65 per unit)

Dec-15

Cost of Goods Sold

$1500

Inventory

$1,500

(To record cost of goods sold, 50 x $30)

12

Dec-20

Sales Discount

$130

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)

13

Dec-23

Cash

$2,457

Unearned Service Revenue

$2,457

(To record cash received in advance for 27 hours of service at $91 per hour)

14

Dec-25

Inventory

$7,500

Cash

$7,500

(To record purchase of inventory, 250 units at $30 for cash)

15

Dec-31

Notes Receivable

$13,000

Sales

$13,000

(To record sale of 200 units at $65 per unit; for a 6-month promissory note)

Dec-31

Cost of Goods Sold

$6,000

Inventory

$6,000

(To record cost of goods sold, 200 units at $30 each)

16

Dec-31

Salaries Expense

$5,000

Cash

$5,000

(To record payment of salaries)

17

Dec-31

Dividends

$750

Cash

$750

(To record payment of dividend of $0.05 per share on 15,000 shares)

18

Dec-31

Depreciation Expense – Vehicle

$100

Accumulated Depreciation - Vehicle

$100

(To record depreciation for the month of December on vehicle; (7,400 -200) x 1/6 x 1/12 = $100)

Dec-31

Cash

$7,000

Accumulated Depreciation - Vehicle

$100

Loss on Sale of Vehicle

$300

Vehicle

$7,400

(To record sale of vehicle for $7,000 and the resulting loss)

19

Dec-31

Notes Payable

$2,600

Interest Expense

$855

cash

$3,455

(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


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