Global Grocer Worksheet

Accounting Basic 2021

5.4 Journal Entries & Ledger - Month of August

On August 31, the following transaction are to be recorded:

1. Cash raised by issuing $80,000 common stock

2. Cash raised by borrowing $50,000 short-term loan from the bank

3. payment of $18,000 franchise fee was paid to Global Grocer International

4. Three months’ rent of $3000 prepaid in cash

5. Warehouse property purchased for $70,000 cash, land allocated $30,000, warehouse
building allocated $40,000.

6. Cash raised from a $25,000 mortgage loan

7. Store fixtures purchased for $5,000 cash

8. Merchandise inventory purchased for $18,000, $8000 paid in cash, the rest put on credit.

9. Global Grocer hired two employees to start work on September 1st, 2014.

Using the Exhibits on the following pages, please do the following:

A. Record journal entries for all transactions incurred on August 31, 2014 in the
general journal (Exhibit 1).
B. Post these journal entries to the T-accounts (Exhibit 2).
C. Prepare the Balance Sheet for August 31, 2014 (Exhibit 3).
Exhibit 1: General Journal - Month of August

No Date Accounts Debits Credi

.
(1) 31/08/14 Cash 80K ts
Common Stock 80K

(2) 31/08/14 Cash 50K

Short-term debt 50K

(3) 31/08/14 Franchise fee 18K

Cash 18K

(4) 31/08/14 Prepaid expenses 3K

Cash 3K

(5) 31/08/14 Land 30K

Warehouse Property 40K

Cash 70K

(6) 31/08/14 Cash 25K

Mortgage payable 25K

(7) 31/08/14 Store fixtures 5K

Cash 5K

(8) 31/08/14 Inventory 18K

Cash 8K

Account Payable 10K

(9) 1/09/14 No Change

 Exhibit 2: Ledger - Month of August

(5) 30,000 10,000 (8)

(3) 18,000
(4) 3,000 Bal 8/31 30,000 10,000 Bal 8/31
(5) 70,000
(6) 25,000
(7) 5,000 (5) 40,000
(8) 8,000
Bal 8/31 51,000 Bal 8/31 40,000 80,000 Bal 8/31

(8) 18,000
(7) 5,000
Bal 8/31 18,000
Bal 8/31 5,000 50,000 Bal 8/31

(4) 3,000
(3) 18,000 25,000 (6)

Bal 8/31 3,000 Bal 8/31

Bal 8/31 18,000 25,000
 Exhibit 3: Balance Sheet for August 31, 2014

Current Assets Current Liabilities

Cash $51,000 Accounts payable $10,000
Merchandise inventory $18,000 Short-term debt $50,000
Prepaid expenses $3,000
Total current liabilities $60,000
Total current assets $72,000
Non-current Liabilities
Mortgage payable $25,000
Non-current Assets
Land $30,000
Warehouse building $40,000
Store fixtures $5,000
Franchise fee $18,000
Common stock $80,000

Total Liabilities and Owners’

Total Assets $165,000 Equity $165,000
5.5 September Accounts

5.5.1. -5.5.4 The Initial Sales

On September 1st, the following business transaction occurred:

S1. The first sale, $100 gift basket was paid in cash.

S2. The second sale, 25 jars Italian Pesto is fully on credit.

S3. The third sale, 100 lbs. Colombian coffee is partly on cash and partly on credit.

Using the Exhibits on the following pages, please do the following:

D. Record journal entries for the initial sales transactions (Exhibit 4)

E. Posting these journal entries to the T-accounts (Exhibit 5)

Exhibit 4: General Journal – The Initial Sales

N Date Accounts Debits Cre

(1 01/09/1
) 4

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Exhibit 5: Ledger – The Initial Sales

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5.5.5 Third Party Transactions
Fast forward to September 30, 2014, please record the effect of all of Global Grocer's
transactions (sales, operating expenses, loan service and others) with external entities.

Sales

1a. During September, Global Grocer recorded total sales of $16,000 of which $11,000
was collected in cash, and

1b. During September, a total cost of goods sold expense of $7,500. Customers did not
make any payments towards their credit accounts, and no inventory was purchased.

Operating Expenses

2. On September 30, monthly salary expense of $3,000 was fully paid in cash.

3. On September 30, utilities expense of $500 was fully paid in cash.

Loan Service

4. First, $250 interested paid for short-term loan.

5. Second, $150 interest paid for the mortgage.

6. Third, $100 payment towards the mortgage principle.

Others: Preparing for The Future

At the end of September, you also prepare for the growing business and the anticipated
holiday by undertaking the following transactions:

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 7. September 28: $30,000 cash raised; common stock issued

8. September 30: Purchase of van for $10,000 cash

9. September 30: Purchase of $8,500 of merchandise inventory; paid $2,500 cash; rest on
credit

10. September 30: Obtained a $20,000 short-term loan, interest payable quarterly,
principal to be paid at the end of the year.

F. Record the said above 11 journal entries (1a, 1b, 2-10) for all transactions incurred
with the third party in September in the general journal (Exhibit 6).

G. Updating and Posting these journal entries to the T-accounts (Exhibit 7)

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5.6 Adjusting Entries
At the end of September, the first month of operations, there are several adjusting entries to be
made. We can identify the accounts that need to be adjusted. They are: prepaid expenses,
warehouse building, store fixtures, franchise fee and taxes payable. Take note that adjusting
entries do not involve any economic exchange with a third party.

11. Expiration of $1,000 of pre-paid expenses

12. Depreciation of warehouse building $300

13. Amortization of franchise fee $750.

14. Depreciation of store fixture $100

15. Accrual of estimated September tax expense of $950 as taxes payable

Using the Exhibits on the following pages, please do the following:

H. Record journal entries for the initial transactions (continue on Exhibit 6)

I. Posting these journal entries to the T-accounts (continue on Exhibit 7)

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5.7 Closing Entries
At the Now it is time to close out each temporary or income statement account and reset it to a
zero balance, in preparation for the next accounting period. Notice that the sales account has a
credit balance, and all the expense accounts have debit balances.

16. Record closing entries and rest income statement accounts to a zero balance. Post to
ledger.

Date Account Title Ref. Debit Credit

  Sept. 30  Sales      
    Cost of Goods Sold       
      Operating expenses      
      Interest Expense      
Tax Expense
    Retained Earnings      

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Exhibit 6: General Journal - Month of September

No Date Accounts Debits Credi

.
(1 30/09/14 Prepaid Expenses ts 1K
1) Rent Expense 1K

(12) Accumulated Depreciation 0.3K

Depreciation Expense 0.3K

(13) Franchise fee 0.75K

Depreciation Expense 0.75K

(14) Accumulated Depreciation 0.1K

Depreciation Expense 0.1K

(15) Tax Expense 0.95K

Taxes Payable 0.95K

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Exhibit 6 (Continued): General Journal - Month of
September
No Date Accounts Debits Credi
.(1) 01/09/14 ts

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Exhibit 7: Ledger - Month of September

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