Three former college classmates decided to open a store near campus to sell wire
ID: 2591768 • Letter: T
Question
Three former college classmates decided to open a store near campus to sell wireless equipment to students. They created a public company, The Wire, and issued stock to interested investors. They plan on creating monthly financial statements.
Account options: Cash, Accounts Receivable, Inventory, Prepaid Rent, Fixtures and Equipment, Accounts Payable, Interest Payable, Wages Payable, Notes Payable, Paid-in Capital, Retained Earnings, Leave Blank.
Transaction 4
Transaction 5
Transaction 4 The owners paid $2,500 for website advertising. They were able to get a good deal because one of the company's owners also owns stock in the website company. The owners also paid $7,000 for some advertising in local newspapers. [Note: Combine both transactions into one entry]. Account: Dollar amount Account: Account: Account: Account: Dollar amount: Dollar amount: Dollar amount: Dollar amount:Explanation / Answer
1.
We know that the owner's paid the expenses so their capital(Paid in capital) must increase and advertisement as an expense our profit(Retain earnings) must decrese.
Retain earnings (Dr.) 9,500
Paid in capital(Cr.) 9,500
2.
As there is a sale and some are on credit so the sale done on credit will increase Accounts receivable and inrease in cash for cash sale and For increase in revenue, Retain earnings will increase.
Cash(Dr.) 26,600
Accounts Receivable (Dr.) 49,400
Retain earnings (Cr.) 76,000
To record cost of goods sold
COGS is an expense so it will decrese profit thus decrease in ratain earnings and Inventory will also decrease by cost as there is a decrease in inventory
Retain earnings (Dr.) 53,200 (76,000*70%)
Inventory(Cr.)76,000