Question

what are the Adjusting entries and trial balance for

The following events occur in July, 2018:

July 1: You take $10,000 from your personal savings account and buy common stock in Peyton Approved.

July 1: Purchase $6,500 in baking supplies from vendor, on account.

July 3: Your parents lend the company $10,000 cash in exchange for a two-year, 6% note payable. Interest and the principal are repayable at maturity.

July 7: Enter into a lease agreement for bakery space. The agreement is for 1 year. The rent is $1,500 per month, and the last month’s rent payment of$1,500 is required at time of lease agreement. The payment was made in cash. Lease period is effective July 1, 2018, through June 30, 2019.

July 10: Pay $375 to the county for a business license.
July 11: Purchase a cash register for $250 (deemed to be not material enough to qualify as depreciable equipment—use misc. exp.).

July 13: You have baking equipment, including an oven and mixer, which you have been using for your home-based business and will now start using in the bakery. You estimate that the equipment is currently worth $6,000, and you transfer the equipment into the business in exchange for additional common stock. The equipment has a 5-year useful life.

July 13: Pay $200 for business cards/flyers/posters/ads to use for advertising. July 14: Pay $300 for office supplies.

July 15: Hire part-time helper to be paid $12 per hour. Pay periods are the 1st through the 15th and 16th through the end of the month, with paydays being the 20th for the first pay period and the 5th of the following month for the second pay period. (No entry is required on this date; it is here for informational purposes only.)

July 30: Received telephone bill for July in amount of $75. Payment is due on August 10.
July 31: Pay $2,400 for a 12-month insurance policy. Policy effective dates are August 1, 2018, through July 31, 2019.
July 31: Accrue wages earned for employee for period of 16th through 31st of July (Wage calculations table provided below).

July 31: Total July bakery sales were $15,000. $5,000 of these sales are on accounts receivable. Step Two Data (Click on the link to return to the prompt.) The following events occur in August, 2018: August 5: Paid employee for period ending 7/31. August 8: Receive payments from customers towards accounts receivable in amount of $3,800. August 10: Paid July telephone bill. August 15: Purchase additional baking supplies in amount of $5,000 from vendor, on account. August 15: Accrue wages earned for employee from period of 1st through 15th of August (Wage calculations table provide August 15: Pay rent on bakery space. August 18: Receive payments from customers towards accounts receivable in amount of $3,000. August 20: Paid $8,500 toward baking supplies vendor payable. August 20: Pay employee for period ending 8/15. August 22: $300 in office supplies purchased. August 31: Received telephone bill for August in amount of $75. Payment is due on September 10. August 31: Accrue wages earned for employee for period of August 16th through August 31st (Wage calculations table pro August 31: August bakery sales total $20,000. $7,500 of this total is on accounts receivable.

d below). vided below).

Step Three (Click on the link to return to the prompt.)
Updated Scenario: Many customers have been asking for more hypoallergenic products, so in September you start carrying a line of hypoallergenic shampoos on

a trial basis. The following information relates to the purchase and sales of the shampoo:

 You use the perpetual inventory method. You are uncertain as to which valuation method to use—FIFO, LIFO, or weighted average, so you calculate inventory using all three and then decide which one you would like to choose.

Data: The following events occur in September, 2018:
September 1: Paid dividends to self in amount of $10,000.
September 5: Pay employee for period ending 8/31.
September 7: Purchase merchandise for resale. See “Inventory Valuation” tab for details.
September 8: Receive payments from customers toward accounts receivable in amount of $4,000.
September 10: Pay August telephone bill.
September 11: Purchase baking supplies in amount of $7,000 from vendor on account.
September 13: Paid on supplies vendor account in amount of $5,000.
September 15: Accrue employee wages for period of September 1 through September 15.
September 15: Pay rent on bakery space: $1,500.
September 15: Record merchandise sales transaction. See “Inventory Valuation” tab for details.
September 15: Record impact of sales transaction on COGS and the inventory asset. See “Inventory Valuation” tab for details.September 20: Pay employee for period ending 9/15.
September 20: Purchase merchandise inventory for resale to customers. See “Inventory Valuation” tab for details. September 24: Record sales of merchandise to customers. See “Inventory Valuation” tab for details.

September 24: Record impact of sales transaction on COGS and the inventory asset. See “Inventory Valuation” tab for details.September 30: Purchase merchandise inventory for resale to customers. See “Inventory Valuation” tab for details.September 30: Accrue employee wages for period of September 16th through September 30th
September 30: Total September bakery sales are $20,000. $6,000 of these sales are on accounts receivable.

Step Six Data (Click on the link to return to the prompt.)
On September 30, the following adjustments must be made:

•  [Note: This is a sample.] Depreciation of baking equipment transferred to company on 7/13. Assume a half month of depreciation in July using the straight-line method.

•  Accrue interest for note payable. Assume a full month of interest for July. (6% annual interest on $10,000 loan from parents.)

•  Record insurance used for the year.

•  Actual baking supplies on-hand as of September 30 are $1,100.

•  Office supplies on-hand as of September 30 are $50.

  Wage calculation data:

Month	Hours	Rate	Pay
31 Jul.	10	12	120
15 Aug.	40	12	480
31 Aug.	35	12	420
15 Sep.	38	12	456
30 Sep.	40	12

Answer 1

General Journal for the period from July, 1 to September, 30
Date	Account Title	Debit	Credit
July, 1	Cash	$10,000
	Common Stock		$10,000
July, 1	Baking Supplies	$6,500
	Accounts Payable		$6,500
July, 3	Cash	$10,000
	6% Note Payable		$10,000
July, 7	Prepaid Rent	$1,500
	Cash		$1,500
July, 10	Licensing fee	$375
	Cash		$375
July, 11	Miscellaneous Expense	$250
	Cash		$250
July, 13	Baking Equipment	$6,000
	Common Stock		$6,000
July, 13	Advertising expense	$200
	Cash		$200
July, 14	Office Supplies	$300
	Cash		$300
July, 30	Telephone expense	$75
	Accounts Payable		$75
July, 31	Prepaid Insurance	$2,400
	Cash		$2,400
July, 31	Salaries expense	$120
	Salaries payable		$120
July, 31	Cash	$10,000
	Accounts Receivable	$5,000
	Sales		$15,000
Aug, 5	Salaries payable	$120
	Cash		$120
Aug, 8	Cash	$3,800
	Accounts Receivable		$3,800
Aug,10	Accounts Payable	$75
	Cash		$75
Aug,15	Baking Supplies	$5,000
	Accounts Payable		$5,000
Aug,15	Salaries expense	$480
	Salaries payable		$480
Aug,15	Rent Expense	$1,500
	Cash		$1,500
Aug,18	Cash	$3,000
	Accounts Receivable		$3,000
Aug,20	Accounts Payable	$8,500
	Cash		$8,500
Aug,20	Salaries payable	$480
	Cash		$480
Aug,22	Office Supplies	$300
	Cash		$300
Aug,31	Telephone expense	$75
	Accounts Payable		$75
Aug,31	Salaries expense	$420
	Salaries payable		$420
Aug,31	Cash	$12,500
	Accounts Receivable	$7,500
	Sales		$20,000
Sept, 1	Dividend	$10,000
	Cash		$10,000
Sept, 5	Salaries payable	$420
	Cash		$420
Sept, 8	Cash	$4,000
	Accounts Receivable		$4,000
Sept,10	Accounts Payable	$75
	Cash		$75
Sept,11	Baking Supplies	$7,000
	Accounts Payable		$7,000
Sept,13	Accounts Payable	$5,000
	Cash		$5,000
Sept,15	Salaries expense	$456
	Salaries payable		$456
Sept,15	Rent Expense	$1,500
	Cash		$1,500
Sept,20	Salaries payable	$456
	Cash		$456
Sept,30	Salaries expense	$480
	Salaries payable		$480
Sept,30	Cash	$14,000
	Accounts Receivable	$6,000
	Sales		$20,000

	Unadjusted Trial Balance		Adjusting Entries		Adjusted Trial Balance
Account	Debit	Credit	Debit	Credit	Debit	Credit
Cash	25,356.75				25,356.75
Baking Supplies	18,500.00			17,400.00	1,100.00
Merchandise Inventory	175.45				175.45
Prepaid Rent	1,500.00				1,500.00
Prepaid Insurance	2,400.00			400.00	2,000.00
Baking Equipment	6,000.00				6,000.00
Misc. Supplies	600.00			550.00	50.00
Accounts Receivable	7,700.00				7,700.00
Notes Payable		10,000.00				10,000.00
Accounts Payable	2,000.00				2,000.00
Wages Payable		480.00				480.00
Common Stock		16,000.00				16,000.00
Dividends	10,000.00				10,000.00
Bakery Sales		55,000.00				55,000.00
Merchandise sales		221.00				221.00
Baking Supplies Expense			17,400.00		17,400.00
Rent Expense	4,500.00				4,500.00
Insurance Expense			400.00		400.00
Misc. Expense	250.00				250.00
Business License Expense	375.00				375.00
Advertising Expense	200.00				200.00
Wages Expense	1,836.00				1,836.00
Telephone Expense	150.00				150.00
COGS	157.80				157.80
Depreciation Expense			250.00		250.00
Accumulated Depreciation				250.00		250.00
Interest Expense			150.00		150.00
Interest Payable			150.00		150.00
Misc. Supplies Expense			550.00		550.00
Total	81,701.00	81,701.00	18,750.00	18,750.00	82,101.00	82,101.00