Accounting cycle exercise – Units 3 & 4

MIXMIC, Inc, is based on the online distribution of shoes. The company presents the
following trial balance at March, 31st, 2016.

Accounts Dr. Cr.

Cash 6.000
Accounts Receivables 5.200
Supplies (inventories) 4.000
Equipment 15.000
Intangible assets - Trademarks 8.000
Accounts Payable 3.500
Notes Payable 5.600
Interest Payable 200
Unearned Revenue 300
Contributed Capital 15.500
Retained Earnings 1.400
Sales Revenue 17.500
Rent expense 2.000
Salaries Expense 3.000
Interest Expense 400
Other Expenses 400
44.000 44.000

From March to December, the company completes the following transactions.

1. A new shareholder invested 25.000 € in cash in the business in exchange for ordinary shares.
2. The company ordered and received new shoes’ models from manufacturers. The company
uses the perpetual method to account for inventories. The company acquires new shoes for
a total amount of 15.000 €.
3. The company paid the 200 € included in ‘Interest payable’ account.
4. Total sales for the period March-December amount 45.000 €. 90% of the total sales for the
period have been paid online with credit cards from customers. Credit cards fees amount 2%
of total sales. The rest will be cleared in 2017. The acquisition cost of the sold products (Cost
of goods sold) for the period amount 13.000 €.
5. Salaries for employees amount 10.000 € for the period March-December 2016.
6. The account “unearned revenues” includes a 300 € customer payment that took place in 2015.
Shoes were finally delivered in May 2016. The acquisition costs of these shoes (Cost of
Goods Sold) amount 100 €.
7. Paid 2.000 € cash on a one-year insurance policy effective July 1st.

(a) Analyze the impact of each operation on fundamental equation and record them both in
the journal and the ledger.

(b) Prepare an income statement and the Balance Sheet at December, 31st.
Note: if you decide to use the periodic method to account for inventory, please take into
account that the final value of the inventory account amounts 5.900 €.