Three former college classmates have decided to pool a variety of work experienc
ID: 2476724 • Letter: T
Question
Three former college classmates have decided to pool a variety of work experiences by opening a store near campus to sell wireless equipment to students. The business has been incorporated as University Wireless.
Required: Several transactions occurred in March. Each is described separately in this folder. For each transaction, indicate the accounts that are affected, whether they increase or decrease, and the amount of the increase or decrease.
YOU MUST FOLLOW THE INSTRUCTIONS BELOW. IF YOU DON'T, YOU MAY KNOW THE CORRECT ENTRY BUT THE COMPUTER WILL NOT RECOGNIZE IT AND YOU WILL NOT RECEIVE CREDIT.
After each transaction description, there are several "Account" submission boxes and corresponding "Amount" submission boxes. To indicate the accounts that you think are affected, choose them from the drop-down menu. But you MUST select them in the order that they are listed in the menu. FOR EXAMPLE, if you think that Cash and Inventory are affected by a particular transaction, you must record the Cash impact first and the Inventory impact second because that is the order that they are listed in the drop-down menu. If you record the Inventory impact first and the Cash impact second, even if they are the correct accounts and even if you have the correct dollar amounts, your answer will be considered wrong.
When you record the dollar amounts, be sure to use a minus sign to indicate a decrease in the account. You don't need to use a plus sign to indicate an increase.
There are always more "Account" and "Amount" submission boxes available than are necessary. When you have indicated all the accounts that are affected by the transaction, select "Leave Blank" from the drop-down menu for EACH of the remaining "Account" submission boxes (you can leave the "Amount" boxes blank).
For transactions 3, 4, 5, and 8, you are given additional instructions. Read them carefully.
You get 5 tries for each complete entry.
The entries for transaction #8 is worth 2 points. The entries for each of the other transactions are worth 1 point.
Transaction 1
On March 1, two former classmates invested a total of $24,000 in cash in exchange for 1,000 shares of stock each.
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Transaction 2
The corporation quickly acquired $44,000 in inventory, 50% of which was paid for in cash. The rest was acquired on open accounts that were payable after 30 days.
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Transaction 3
A store was rented for $6,000 for the year. A lease was signed for one year on March 1. Rent for the first 2 months was paid in advance. [Note: Record the March 1 transaction first and the March 31 adjustment second.]
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Transaction 4
Advertising was purchased for cash of $2,500 from a newspaper owned by one of the stockholders; additional advertising services of $5,000 were acquired on account. [Note: Combine both transactions into one entry].
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Transaction 5
Sales were $60,000. Merchandise was sold for 2 times its purchase cost. 40% of the sales were for cash. [Note: Record the sales transaction first and the expense transaction second]
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Transaction 6
Wages and salaries incurred in March amounted to $10,600, of which $4,900 was paid.
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Transaction 7
Miscellaneous expenses paid for in cash were $1,900.
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Transaction 8
On March 1, fixtures and equipment were purchased for $4,000 with a downpayment of $1,000 plus a $3,000 note payable in one year. Interest of 5% per year is due when the note is repaid. The estimated life of the fixtures and equipment is 12 years with no expected salvage value. Depreciation on the fixtures and equipment is computed on a straight-line basis. [Note: Record the March 1 equipment purchase first, then the March 31 depreciation adjusting entry, and finally the March 31 interest adjusting entry. Also, round all answers to the nearest cent.]
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Transaction 9
Cash dividends totalling $4,800 were declared and paid to stockholders on March 31.
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Explanation / Answer
Transaction Accounts affected Dollar amounts Increase / Decrease 1. Cash 24,000 Increase Common stock 24,000 Increase 2. Inventory 44,000 Increase Cash 22,000 Decrease Accounts payable 22,000 Increase 3. Prepaid rent 1,000 Increase Cash 1,000 Decrease 4. Advertising expense 7,500 Increase Cash 2,500 Decrease Accounts payable 5,000 Increase 5. Sales 60,000 Increase Cost of goods sold 30,000 Increase Cash 24,000 Increase Accounts receivable 36,000 Increase Inventory 30,000 Decrease 6. Wages and salaries expense 10,600 Increase Cash 4,900 Decrease Wages and salaries payable 5,700 Increase 7. Miscellaneous expenses 1,900 Increase Cash 1,900 Decrease 8. Fixtures and equipment 4,000 Increase Cash 1,000 Decrease Note payable 3,000 Increase Depreciation expense 333 Increase Accumulated depreciation 333 Increase Interest expense 12.50 Increase Interest payable 12.50 Increase 9. Dividends 4,800 Increase Cash 4,800 Decrease