Abbott Shoe Corporation is a RETAILER of shoes.

1. On 1/1/18, ASC begins doing business by obtaining CASH from three principal
owners: Lawrence J. Abbott for $100,000, Don Majkowsky for $50,000 and Brett
Favreau for $50,000. All 3 principals pay in CASH (for a total of $200,000).
Please give the journal entry to describe this transaction (please simply denote this
as ‘contributed capital’).

Cash $200,000
Contributed Capital $200,000

2. On 1/1/18, ASC obtains a cash register for $12,000 – on account. It has a 0

salvage value and a useful life of 5 years. Please give the journal entry to
describe this transaction.

Equipment $12,000
Accounts Payable $12,000

3. On 1/1/18, ASC obtains bank financing by procuring a 10-year loan for $20,000
(i.e. the principal of $20,000 is due in 1/1/2028) with an annual interest rate of 5%
with payments DUE in CASH at 12/31 of each year. Give the journal entry to
describe this transaction.

Cash $20,000
Loans Payable $20,000

4. On 1/1/18, ASC purchases – on account – 100 Air Abbotts for $15,000. It also
purchases – on account – 200 Air Smunts for $32,000. Please give the journal
entry to record this transaction.

Inventory- Air Abbotts $15,000

Accounts Payable $15,000
Inventory-Air Smunts $32,000
Accounts Payable $32,000

5. During the year, ASC paid IN CASH the following to its workers:

Administrative Salaries to CEO, accountant, etc.. $2,000

Salaries to retail workers $4,000

Please give the journal entry to describe this transaction.

Salaries & Wages expenses $2,000

 Cash $2,000
Payroll expenses $4,000
Cash $4,000

6. During the year, ASC sold 50 Air Abbotts to Dr. Paul Fischer ON ACCOUNT for
$1,000/Air Abbott. Give the journal entry to describe this transaction.

Accounts receivable $50,000

Sales revenue $50,000
Cost of goods sold $7,500
Inventory $7,500

7. During the year, ASC sold 80 Air Smunts for $2,000/Air Smunt in CASH. Give
the journal entry to describe this transaction.

Cash $160,000
Sales revenue $160,000

Cost of goods sold $12,800

Inventory $12,800

8. During the year, ASC paid CASH the following bills:

Utilities for office building $5,000
Rent for building $2,000
Give the journal entry to describe this transaction.

Utilities expense $5,000

Rent expense $2,000
Cash $7,000

9. Dr. Paul Fischer pays $10,000 of his account balance. Give the journal entry to
describe this transaction.

Cash $10,000
Accounts receivable $10,000

10. Give any adjusting journal entries needed on 12/31/18.

Depreciation expense – cash register $2,400

Accumulated depreciation – cash register $2,400

Interest expense $1,000

 Cash $1,000

11. Please prepare the CLOSING journal entry for 12/31/18.

Sales $210,000
Cost of goods sold $20,300
SG & A expenses $16,400
Retained earnings $173,300

12. Based upon 1above, PREPARE AN INCOME STATEMENT for 2018.

Sales (50,000 + 160,000) $210,000

Less: Cost of goods sold (7500 + 12,800) $20,300
Gross Margin $189,700
Less: SG & A $16,400
Net income $173,300

13. Based on the above, prepare a BALANCE SHEET for 2018

Assets
Current Assets
Cash $376,000
Accounts receivable $40,000
Inventory $26,700
Total current assets $442,700
Property, plant & equipment
Equipment – Cash register $12,000
Less: Accumulated depreciation $2,400 $9,600
Total assets $452,300

Liabilities & Stockholder’s Equity

Current liability
Accounts payable $59,000
Total current assets $59,000
Long-term liabilities
Loans payable $20,000
Total liabilities $20,000
Stockholder’s equity
Contributed capital $200,000
Retained earnings $173,300
Total stockholder’s equity $373,300
Total liabilities & stockholder’s equity $452,300