Finacc Problem

Problem 4-3.

Luft Corporation’s accounts had the following beginning balances:

Account | | Dr. | | Cr. | Accounts Payable | | | | $ | 3,070 | Accounts Receivable | | $ | 2,160 | | | Accumulated Depreciation | | | | 2,800 | Allowance for doubtful accounts | | | | 70 | Cash | | | | 1,440 | | | Fixed Assets (at cost) | | | 6,200 | | | Inventories | | | | 1,730 | | | Note Payable (current) | | | | | 600 | Owner's Equity | | | | | 4,990 | | | | $ | 11,530 | $ | 11,530 | | | | | | | |

During the period, the following transactions occurred: 1. Purchased inventory on account, $1,300. 2. Paid employees, $730. 3. Sold goods for cash, $1,940. 4. Sold goods on credit, $1,810. 5. Overhead and other expenses paid in cash, $900. 6. Collection of accounts receivable, $1,510. 7. Paid certain accounts payable, $1,720. 8. Received cash for revenue applicable to the next period, $650. 9. Increased the current note payable by $200. 10. Physical inventory showed ending balance of $1,750. 11. Depreciation expense, $300.

Required: a. Journalized the transactions. b. Set up T accounts and post beginning balances and transactions. c. Determine the cost of goods sold d. Prepare an ending balance sheet e. Prepare an income statement for the period. (ignore taxes).

ANSWERS:

A.

1) Dr. Inventory……………………………………. $1,300 Cr. Accounts Payable…………………….. $1,300

2) Dr. Wages Expense….………………………… $730 Cr. Cash……………………………………. $730

3) Dr. Cash………………………………………… $1,940 Cr. Sales…………………………………… $1,940

4) Dr. Accounts Receivable……………………… $1,810 Cr. Sales…………………………………… $1,810

5) Dr. Overhead & other Expenses…………….. $900 Cr. Cash…………………………………… $900

6) Dr. Cash………………………………………... $1,510 Cr. Accounts Receivable………………… $1,510

7) Dr. Accounts Payable………………………… $1,720 Cr.