I need help journalizing and creating the basic financial statements for this practice set.
Brooke’s Books Practice Set MGMT 1A Spring 2021 Prof. Elizabeth Woo Introduction: Brooke’s Books is a retail book store. The company is owned by Brooke Riley, the only shareholder (to be). Brooke has asked you to keep the records for the store, and to prepare its financial statements at the end of the month. You decide to use a simple manual accounting system consisting of: · A General Journal · A General Ledger Books of the company are adjusted and closed, with financial statements prepared on a monthly basis. Reversing entries ARE NOT made. The General Ledger is empty, as this is the first month of operations. It is October, the start of the busiest retail season of the year, and there are going to be many entries to reflect all the activity necessary to get the business started. Brooke will sell merchandise inventory to two types of customers: · Walk-in customers: These are customers who come to the physical store location, browse the selection of merchandise inventory, and purchase goods while onsite. Brooke decides to accept CASH ONLY for in-person sales to walk-in customers. · Online customers: These customers place orders on account. Sales of merchandise inventory which are made on account are made on strict terms of 2/10, N/30, unless otherwise stated. Additionally, purchases of merchandise inventory are made on strict terms of 2/10, N/30, unless otherwise stated. You have decided to account for sales and purchases using the GROSS METHOD. Use the perpetual inventory system to account for inventory. Brooke’s Books depreciates assets according to the straight-line method of depreciation, and uses the half-month convention for asset purchases occurring during the month. Brooke hires one employee – P. Anderson, who works in the retail store as a salesperson. Required: Journalize the following transactions for October. Entries should be posted daily/immediately. Due to the order of posting, it is possible that an account with a normal debit balance may temporarily have a credit balance (and vice versa). Do not worry – at the end of the month, after all the posting has been completed, everything will work out properly. Remember – a journal entry is not complete without a description! Transactions: Oct 1Brooke Riley contributes the following to start the business: Cash, $15,000; Merchandise Inventory (she has saved up certain rare books and other items over the years), $42,000. Ms. Riley is the only stockholder and is issued 5,700 shares of $10 par common stock. Oct 1Paid first and last month’s rent, $6,000 total (this amount covers two months’ rent – October, Year 1 and some future month at the end of the business operations), to Vroman’s Property Co. (Assume the entire rent amount is paid for the retail store space; no rent is to be allocated to “office space”.) Oct 1 Borrowed $32,250 from Page Bank, on a five-year, 8% note, with interest only to be paid at each year-end (December 31) and principal due October 1, Year 6. Oct 1Purchased office furniture from Bailey Furniture Company, $16,100, cash. The useful life is ten years and the salvage value is $1,100. Brooke’s Books uses straight line depreciation. Oct 1Purchased some inventory on account from Arbitrary House Publishers, $50,500, terms 2/10, N/30. Oct 1As soon as the store opens the doors, ten customers walk in ready to spend money, and they do. Total cash sales for the day, $1,000. The cost of the related merchandise sold was $846. Oct 1As soon as the online store opens, we sell three online customers merchandise on account: · J. Rowling, first edition, autographed copy of The Velveteen Rabbit sold for $1,600. The cost of the merchandise was $1,280. · R. Rowell, antique rotary telephone sold for $1,700. The cost of the merchandise was $1,190. · M. Twain, upcycled white picket fence bookcase sold for $4,400. The cost of the merchandise was $2,000. Oct 2Purchased cash registers (Store Equipment) on account from Ring Up Company, $7,200, with terms N/30. Useful life is three years, salvage value is $0, straight-line depreciation. Oct 3Purchased office supplies on account with terms N/30 from Office Max, $2,500. Oct 4Paid cash for three months of insurance in advance, $3,300 to Book Worm Insurance Company. Debit the entire amount to one account. Oct 5Sold some merchandise on account to the following new corporate customers: · Polytechnic Academy purchased 100 textbooks for $180, each. The cost of the merchandise was $72 each. · Arcadia City College purchased 1,000 textbooks for $150, each. The cost of the merchandise was $50 each. · Sunshine Preschool purchased 200 picture books for $16 each. The cost of the merchandise was $6 each. Oct 6Received a check on account from J. Rowling in payment of her Oct 1 invoice. (Reminder, all sales on account are made with terms 2/10, n/30. It will be up to you to determine whether or not payment is made within the discount period.) Oct 7Recorded cash sales for the rest of the first week, $2,620. The cost of the related merchandise sold was $2,096. Oct 8Some of the units sold to Polytechnic Academy are defective. Issued a $3,000 purchase allowance. (Polytechnic keeps the damaged merchandise inventory.) Oct 9Sold some merchandise on account to the following businesses: · S. King, $3,900. The cost of the merchandise was $2,600 · D. Steele, $8,800. The cost of the merchandise was $6,600 Oct 10Due to a power surge, all the bulbs in our store had to be replaced. Purchased store supplies from Bells & Bulbs, on account, $1,250, terms, n/30. Oct 11Paid balance due to Arbitrary House. for purchase made on October 1. Oct 12Purchased some inventory on account from Panda Publishers, $6,750, terms 2/10, n/30. Oct 12Issued a credit memorandum to Sunshine Preschool for the return of some merchandise (50 picture books). The merchandise was in good condition. Oct 13Received payment from R. Rowell on account. Oct 13Sold some store supplies (at our cost) to the pharmacy next door. They paid us in cash, $190. Oct 13Received credit memorandum from Panda Publishers for damaged merchandise, $1,000. Oct 14Sold merchandise on account to K. Hannah, $2,300. The cost of the merchandise was $1,380. Oct 14Accrued the semi-monthly salary expense for our only employee, P. Anderson, as follows (record this entry and the next one, as is, in the general journal): Salary Expense$500 Federal Income Tax Payable$101 FICA Tax Payable 40 State Income Tax Payable 12 Medical Insurance Payable 3 Salaries Payable 344 Oct 14Recorded employers payroll taxes as follows: Payroll Tax Expense$67 FICA Tax Payable$40 FUI Tax Payable 4 SUI Tax Payable 23 Oct 14Recorded cash sales for the week, $10,400. The cost of the merchandise was $6,240. Oct 15Issued payroll check to our employee, P. Anderson, for the entire amount due. Oct 16Received the following checks from customers on account: · S. King – in full payment of their Oct 9 invoice · Sunshine Preschool – in full payment of their Oct 5 invoice Oct 17Received a check from Polytechnic Academy in full payment of their Oct 5 invoice. Oct 17Purchased delivery vehicle from Petrol People Movers, $18,000 cash. (Useful life of five years, salvage value of $1,500, straight-line depreciation) Oct 18Purchased some merchandise inventory for resale from each of the following suppliers on account: · Page Publishing $15,000 · Collins Harper$24,000 · Symon & Simon$36,000 Oct 19Paid Bells & Bulbs the amount due from the Oct 10 purchase. Oct 20Ms. Riley, the owner, took home merchandise inventory for her own personal use, $12,000. This should be recorded as a dividend. Oct 21Recorded cash sales for the week, $18,500. The cost of the merchandise was $9,250. Oct 22Paid the amount due to Panda Publishers from the Oct 12 purchase. Oct 24We sold merchandise on account to three new clients: · L. Wingate, set of canoe paddles to be used for research purposes for her next novel - sold for $19,000. The cost of the merchandise was $11,600. · H. Fielding, typewriter sold for $1,750. The cost of the merchandise was $1,300. · J. Tolkien, single golden ring sold for $28,000. The cost of the merchandise was $20,000. Oct 25Returned for cash some merchandise previously purchased from Panda Publishers for $1,000. (Hint: In recording this entry, we do not receive a cash refund in full, because we took advantage of the cash discount when we originally paid for the goods.) Oct 26Received check from L. Wingate in payment of their balance due from the Oct 24 invoice. Oct 27 Issued a full credit memorandum to H. Fielding for the return of the merchandise from her Oct 24 purchase. The merchandise was in good condition. Oct 28Our delivery truck needed repairs. We had it fixed at Four Wheels Drive, where we paid the bill with cash, $1,200. Oct 29In honor of her birthday, Ms. Riley closed the shop today, after taking home cash of $5,000 for her own personal use. Oct 30Returned for credit, office supplies purchased from Office Max on Oct 3, $800. Oct 30Recorded cash sales for the week, $12,340. The cost of merchandise was $5,678. Oct 30Accrued the semi-monthly salary expense and employers payroll taxes for our only employee, P. Anderson (repeat both the entries from Oct 14) Oct 31Issued payroll check to our employee, P. Anderson, for the entire amount due. Oct 31Paid Office Max balance due. Required: MONTH END CLOSING AND ADJUSTMENTS 1. Post all items from the general journal as of Oct 31 to the general ledger if you have not already done so, and total each account. Label this total as “Balance” in each T-Account in the general ledger. 2. Prepare an unadjusted trial balance of the general ledger, using the worksheet enclosed on pg. 37-38. 3. In the general journal, record any necessary period-end adjusting journal entries on Oct 31 considering the following information: a. Ending inventory of office supplies is $255. b. Ending inventory of store supplies is $498.