Problem - Kate Corporation operates a store that sells uniforms. The following are the transactions that occurred during the first quarter of operations- Jan. 1 to Mar. 31, 2014.
Jan. 1 Kate issues 20,000 shares of $2 par value common stock with an issuing price of $10 per share.
Jan. 2 Purchased furniture and fixtures from Acme Furniture for $11,520 cash.
Jan. 4 Purchased $1,800 of office supplies for cash.
Jan. 15 Paid $21,600 in advance for one year's rent on the store building. The rent begins with
Jan 15. The company counts January for half a month.
Jan. 31 Paid salaries to employees for the first month, $3,600.
Feb. 1 Purchased $78,000 of uniforms inventory on account from the Birdwell Uniforms Manufacturing Company.
Feb. 1 Borrowed $64,000 from a local bank and signed two notes. The first note of $18,000 requires payment of principal in six months with annual interest rate at 5%.
The second note of $46,000 requires the payment of principal in two years and annual interest payment with annual interest rate at 8%.
Feb. 6 Sold uniforms on account to St. Jude's School for $7,200. Cost of the uniforms sold is $4,800.
Feb. 9 Paid Birdwell Uniforms Manufacturing Company $50,400 for the purchase on Feb. 1.
Feb. 20 Sold uniforms to a chemical factory for $79,200 cash. Cost of the uniforms sold is $47,520.
Feb. 23 Purchased $12,000 of uniforms inventory on account from the Birdwell Uniforms Manufacturing Company.
Feb. 28 Paid salaries to employees for the month of February, $4,200.
Mar. 1 Sold uniforms to the football team of Robert Lee High School, and accepted a $12,000, three-month, note receivable with annual interest rate at 6%. Cost of the uniforms sold is $9,600.
Mar. 1 Subleased a portion of the building to a jewelry store. Received $3,600 in advance for three months' rent beginning on Mar. 1.
Mar. 3 Some uniforms were returned by the chemical factory which made a purchase on Feb. 20. The selling price and cost of the returned uniforms is $7,200 and 4,320, respectively. Cash of $7,200 is returned to the customer.
Mar. 23 Paid Birdwell Uniforms Manufacturing Company $14,400 for the purchases in Feb.
Mar. 25 Received $4,800 cash from St. Jude's School.
Mar. 30 The corporation announced and paid its shareholders cash dividends of $3,000.
Requirements:
1. Analyze the transactions and record journal entries in General Journal.
2. Record adjusting entries in General Journal and post to the general ledger accounts.
Additional information:
a. At the end of March, $1,000 of supplies remained.
b. The furniture and fixtures have a useful life of six years and will be worthless at the end of their useful life.
c. Salaries for the month of March are $4,800, and will be paid on April 3, 2014.
d. The company's management estimated that of the $2,400 remaining on account from St. Jude's School, only $2,100 would ultimately be collected.
e. Income tax rate applied to the company is 30%.