Question

1. Identify, analyze, record, and post transactions (THERE ARE 4 PARTS TO THIS QUESTION): King Toot’s music store sells musical instruments and other related merchandise to customers. The following is a list of King Toot’s account balances at the beginning of December (i.e. as of December 1^st, 2017): Cash: $18,750; Accounts Receivable (A/R): $11,980; Inventory: $20,800; Equipment: $34,400; Accounts Payable (A/P): $13,930; Notes Payable (N/P): $55,000; Common Stock: $17,000. Assume all other accounts had a balance of $0 as of 12/1/17. The accountant for King Toot’s observed the following transactions which occurred during December 2017.
   1. 12/3/17: Issued 400 shares of common stock for $10 per share.
   2. 12/5/17: Sold merchandise inventory, which originally cost $900, for $2,200 to customers. Of the $2,200 in sales, $500 worth was purchased by customers using cash. The remaining $1,700 was purchased by customers on account. (HINT: don’t forget there will be two parts to record here—one part to record the sales revenue and one part to record the cost of the merchandise inventory sold).
   3. 12/8/17: Paid $4,250 in cash to creditors on outstanding accounts payable.
   4. 12/20/17: Received $3,080 in cash from customers as payment on their accounts receivable.
   5. 12/30/17: Paid $1,100 in cash for December’s Rent.
   6. 12/30/17: Paid $120 in cash dividends to stockholders.

Part 1 – Account Identification and transaction analysis:   Prepare a ‘transaction worksheet’ summarizing all of the December transactions for King Toot’s. I have provided a framework for you and completed transaction a. for you as an example. After recording all transactions, be sure to calculate ending balances as of 12/31/17 and enter them in the last row of the worksheet. HINT: Make sure the accounting equation remains in balance after entering each transaction!

Part 2 – Record transactions using Journal Entries:   Record all of the above transactions using journal entries. Assume King Toot’s uses the following accounts: Cash, A/R, Inventory, Equipment, A/P, Notes Payable, Common Stock, Sales Revenue, Cost of Goods Sold (COGS), Rent Expense, and Dividends. I have completed transaction a. for you as an example. Be sure to include the date and a brief description of the entry.

1.       12/3/17                                                               DEBIT             CREDIT

Cash                                                                          $4,000

                Common Stock                                        $4,000

To record issuance of 400 shares common stock, $10 par value.

Part 3 – Post transactions to T-Accounts: First, make sure to enter beginning balances (as I have done for Cash and Common Stock) in the T-accounts below. If the beginning balance is $0, enter $0. Then, post all of the above transactions to the proper T-Accounts. I have completed transaction a. (occurring on 12/3) for you as an example. After all entries have been posted, update all the T-accounts and calculate the ending balances for each T-account as of December 31, 2017. (HINT: Remember the accounting equation! Double check your work: the total of all ending Asset account balances should = total of all ending Liability + total of all ending SHE account balances…).

PART 4 – Prepare an unadjusted trial balance:

Prepare an unadjusted trial balance for King Toot’s as of December 31, 2017 with the list of accounts in the following order: assets, liabilities, common stock, revenues, expenses, and dividends.

Cash Equip... Assets Accts. Inventory Rec. (A/R). $11,980 $20,800 Liabilitiese Accts Notes. Payable Payable. Stockholders' Equity Common Retained Earnings. Stock | Rev... (Exp.). (Div.). (A/P). $34,400. $13,930. $55,000 + $0 $0. $17,000 +$4,000. 12/1 $18,750. . +$4,000 b.1. .. b.2.1. f. 12/31 A/P Cash 12/1) $18,750 12/3) $4,000 Common Stock $17,000_{12/12 $4,000 (12/3+ ¢ t t ¢ t ¢ Notes payable Sales Revenue ¢ ¢ ¢ ¢ ¢ Inventory Rent Expenser ¢ ¢ ¢ ¢ ¢ Equipment Cost of Goods Solde ¢ ¢ £ £ € Dividends Į ţ I

Answer 1

Calculation + King Toot's music store Transac Balance Sheet Income Statement Assets Liabilities Stockholders Equity Date Cash Accts Rec Inventory Equipment = Accts Pay Notes Pay + Common Stock Retained Earnings Revenue Expenses Dividends 1-Dec $18,750 $ 11,980 $ 20,800 $ 34,400 = $ 13,930 $ 55,000 + $ 17,000 a $ 4,000 + $ 4,000 b.1 $ 500 $ 1,700 $ 2,200 b.2 $ (900) $ (900) $ (4,250) $ (4,250) d $3,080 $ (3,080) e $ (1,100) $ (1,100) f $ (120) $ (120) 31-Dec $20,860 $ 10,600 $ 19,900 $ 34,400 = $ 9,680 $ 55,000 + $ 21,000 $2,200 $ (2,000) $ (120) + -400*10 Sales Revenue Cost of goods sold + + + + Rent expense

King Toot's music store Journal entries No. Date Account a 3-Dec Cash Common Stock Credit Debit $ 4,000 $ 4,000 b.1 5-Dec Cash Accounts Receivable Sales Revenue $ $ 500 1,700 $ 2,200 b.2 $ 900 5-Dec Cost of goods sold Inventory $ 900 C $ 4,250 8-Dec Accounts Payable Cash $ 4,250 d $ 3,080 20-Dec Cash Accounts Receivable $ 3,080 e $ 1,100 30-Dec Rent expense Cash $ 1,100 f $ 120 30-Dec Dividends Cash $ 120

Credit King Toot's music store T Accounts Date Debit Date Credit Cash 1-Dec $ 18,750 8-Dec $ 4,250 3-Dec $ 4,000 30-Dec $ 1,100 5-Dec $ 500 30-Dec $ 120 20-Dec $ 3,080 Date Debit Date Credit Accounts Receivable 1-Dec $ 11,980 20-Dec $ 3,080 5-Dec $ 1,700 Date Debit Date Credit Inventory 1-Dec $ 20,800 5-Dec $ 900 Date Debit Date Equipment 1-Dec $ 34,400 Bal. Bal. Bal. $ 34,400 Bal. $ 20,860 Accounts Payable 8-Dec $ 4,250 1-Dec $ 13,930 $ 10,600 Notes Payable 1-Dec $ 55,000 $ 19,900 Common Stock 1-Dec $ 17,000 3-Dec $ 4,000 Bal. $ 55,000 $ 21,000 $ 9,680 Sales Revenue 1-Dec $ . 5-Dec $ 2,200 Rent expense 1-Dec $ - 30-Dec $ 1,100 Bal. Cost of goods sold 1-Dec $ - 5-Dec $ 900 1-Dec $ 30-Dec $ Dividends . 120 Bal. $ 2,200 Bal. $ 1,100 Bal. $ 900 Bal. $ 120

King Toot's music store Account Names Cash Accounts Receivable Inventory Equipment Accounts Payable Notes Payable Common Stock Sales Revenue Cost of goods sold Rent expense Dividends Totals Unadjusted TB Debit Credit 20,860 10,600 19,900 34,400 9,680 55,000 21,000 2,200 900 1,100 120 87,880 87,880