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Saturday, July 31, 2010

Accounting Principles Exercise Solution for Cornerstone Merchandising

Student : M. Reed Assignment : Apply your Accounting Knowledge

Course: Accounting I Ch. 2 and 3

Instructions
1-journalize the transaction using a perpetual invetory system
2- enter the beginnig cash and capital balances and post the transactions.
3-prepare the income statement through gross profit for the month of april 2008

More instructions/specific instructions are posted below:

1.1 Journal Entries

Date

Accounts

Debit

Credit

January 2

Cash

36,000

Knipper, capital

36,000

3

Supplies

500

Furniture

2,600

Accounts payable

3,100

4

Cash

1,500

Service revenue

1,500

7

Land

22,000

Cash

22,000

11

Accounts receivable

900

Service revenue

900

15

Salary expense

570

Cash

570

16

Accounts payable

2,600

Cash

26,000

18

Cash

1,800

Service revenue

1,800

19

Accounts receivable

800

Service revenue

800

29

Cash

400

Accounts receivable

400

31

Salary expense

570

Rent expense

700

Knipper, Withdrawals

2,200

Cash

3,470

1.2 T-accounts

Knipper, capital Cash

$ 36,000

$ 36,000

$ 22,000

1,500

1,800

400

570

2,600

3,470

$ 11,060

Supplies Furniture

$ 500

$ 2,600

Accounts payable Service revenue

$ 2,600

$ 3,100

$ 1,500

900

1,800

800

$ 500 $ 5,000

Land Accounts receivable

$ 22,000

$ 900

800

$ 400

$ 1,300

Rent expense Knipper, withdrawals

$ 700

$ 2,200

Salary expense

$ 570

570

$ 1,140

1,3 Trial balance

Laura Knipper, Attorney

Trial Balance

January 31, 2007

Trial Balance

Account

Debit

Credit

Cash

$ 11,060

Accounts receivable

1,300

Supplies

500

Furniture

2,600

Land

22,000

Accounts payable

$ 500

Kni[[er, capital

36,000

Kni[[er, withdrawals

2,200

Service revenue

5,000

Salary Expense

1,140

Rent expense

700

Total

$ 41,500

$ 41,500

2.1 Trial Balance Worksheet

Hummer Limo Service

Trial Balance Worksheet

October 31, 2007

Trial Balance

Adjustments

Adjusted Trial Balance

Account

Debit

Credit

Debit

Credit

Debit

Credit

Cash

6,300

6,300

Accounts receivable

1,000

a.

2,000

3,000

Prepaid rent

3,000

b.

600

2,400

Supplies

600

c.

400

200

Automobiles

72,000

72,000

Accumulated Depreciation

3,000

d.

1,000

4,000

Accounts payable

2,800

2,800

Salary payable

e.

200

200

Ben Hummer, capital

73,000

73,000

Ben Hummer, Withdrawals

3,600

3,600

Service revenue

9,400

a.

2,000

11,400

Salary expense

1,400

e.

200

1,600

Rent expense

b.

600

600

Fuel expense

300

300

Depreciation expense

d.

1,000

1,000

Supplies expense

c.

400

400

Total

88,200

88,200

4,200

4,200

91,400

91,400

2.2 Income Statement

Hummer Limo Service

Income Statement

For the Month Ended October 31, 2007

Revenues

Service revenue

$ 11,400

Expenses

Salary expense

1,600

Rent expense

600

Fuel expense

300

Depreciation expense

1,000

Supplies expense

400

Total expenses

3,900

3,900

Net Income

7,500


2.3 Statement of Changes in Equity

Hummer Limo Service

Statement of Changes in Owner’s Equity

For the Month Ended October 31, 2007

Ben Hummer capital, beginning $ 73,000

Add: Net Income 7,500

80,500

Less: Ben Hummer, Withdrawals (3,600)

Ben Hummer capital, ending $ 76,900

2.4 balance Sheet

Hummer Limo Service

Balance Sheet

October 31, 2007

Assets

Liabilities

Cash

$ 6,300

Accounts payable

$ 2,800

Accounts receivable

3,000

Salary payable

200

Prepaid rent

2,400

Total Liabilities

3,000

Supplies

200

Ben Hummer, capital

76,900

Automobile $ 72,000

Less: Accumulated

depreciation (4,000)

68,000

Total Assets

79,900

Total Liabilities and Owner’s Equity

79,900

Instructions

The Given:
Cornerstone distributing company, a single proprietary business of Mr. Owner completed the following merchandising transactions in the month of July 2008, its first month of operation.
In the morning of July 1st , Mr. Owner made a cash deposit of $9,000 for the business capital. On the same day, there was a purchased merchandise on account from DAKOTA SUPPLY CO, $6900 , TERMS /0 , N/30.

In the afternoon of July first, a supplies amounting to $600 was purchased on cash.

July 4th sold merchandise on account $5500 , FOB destination , terms 1/10, , n/30. the cost of the merchandise sold was $4100.

July 5 $240 freight on July 4 sale

July 6 received credit from dakota suplly co merchandise returned $500

July 11 paid dakota supply co in full less discount

July 13 received collections in full , less discounts from customers billed om July4th

July 14 purchased merchandise for cash $3800

July16 received refund from supplier for returned goods on cash ourchase of July 14 $500

July 18 purchased merchandise from skywalker distributors $4500, FOB shipping point terms 2/10, n/30

July 20
paid freight on July 8 purchase $100

July23 sold merchandise for cash $6400 , the merchandise sold had a cost of $5,120

July 26 purchase merchandise for cash $2,300

July 29 made refunds to cash customers for defective merchandise $90. the returned merchandise has a scrap value of $30

July30 sold merchandise on account $3700 terms n/30 the cost of the merchandise sold was $2800
Notes:
a. The supplies at the end of the month amounted to $200
b. Portion of the 2-month advance rental payments of $1,000 was consumed.

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