Preparing Adjusting Entries, Financial Statements, and Closing Entries
Seaside Surf Shop began operations on July 1, 2014, with an initial investment of $50,000. During the initial 3 months of operations, the following cash transactions were recorded in the firm's checking account.
| Cash receipts |
Cash payments |
| Initial investment by owner.......$ 50,000 |
Rent .........................$ 24,000 |
| Collected from customers .......81,000 |
Fixtures and equipment .........25,000 |
| Borrowed from bank 7/1/2014 ....10,000 |
Merchandise inventory ..........62,000 |
| Total cash receipts.............$141,000 |
Salaries ......................6,000 |
| Other expenses................13,000 |
| Total cash payments............$130,000 |
Additional information
1. Most sales were for cash, however, the store accepted a limited amount of credit sales; at September 30, 2014, customers owed the store $9,000.
2. Rent was paid on July 1 for six months.
3. Salaries of $3,000 per month are paid on the 1st of each month for salaries earned in the month prior.
4. Inventories are purchased for cash; at September 30, 2014, inventory worth $21,000 was available.
5. Fixtures and equipment were expected to last ?ve years with zero salvage value.
6. The bank charges 12% annual interest (1% per month) on its bank loan.
Required
Using the financial statement effects template and journal entry form set up T-accounts and post adjusting entries to them at September 30, 2014.