Exercise 4-5 (Algo) Record transactions and calculate financial statement amounts LO 2, 6, 7 The transactions relating to the formation of Blue Co. Stores Inc., and its first month of operations follow. The firm was organized and the stockholders invested cash of $8,900. The firm borrowed $4,800 from the bank; a short-term note was signed. Display cases and other store equipment costing $1,650 were purchased for cash. The original list price of the equipment was $1,940, but a discount was received because the seller was having a sale. A store location was rented, and $1,500 was paid for the first month's rent. Inventory of $14,400 was purchased; $8,500 cash was paid to the suppliers, and the balance will be paid within 60 days. During the first week of operations, merchandise that had cost $4,300 was sold for $6,200 cash. A newspaper ad costing $120 was arranged for; it ran during the second week of the store's operations. The ad will be paid for in the next month. Additional inventory costing $4,150 was purchased; cash of $1,300 was paid, and the balance is due in 30 days. In the last three weeks of the first month, sales totaled $13,250, of which $9,300 was sold on account. The cost of the goods sold totaled $8,400. Employee wages for the month totaled $1,900; these will be paid during the first week of the next month. The firm collected a total of $3,350 from the sales on account recorded in transaction i. The firm paid a total of $4,600 of the amount owed to suppliers from transaction e. Required: Record each transaction in the appropriate columns. Indicate the financial statement effect. Calculate the total assets, liabilities, and stockholders' equity at the end of the month and calculate the amount of net income for the month. After completing parts a through l, prepare an income statement for Blue Co. Stores Inc. for the month presented and a balance sheet at the end of the month.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Exercise 4-5 (Algo) Record transactions and calculate financial statement amounts LO 2, 6, 7

The transactions relating to the formation of Blue Co. Stores Inc., and its first month of operations follow.

The firm was organized and the stockholders invested cash of $8,900.
The firm borrowed $4,800 from the bank; a short-term note was signed.
Display cases and other store equipment costing $1,650 were purchased for cash. The original list price of the equipment was $1,940, but a discount was received because the seller was having a sale.
A store location was rented, and $1,500 was paid for the first month's rent.
Inventory of $14,400 was purchased; $8,500 cash was paid to the suppliers, and the balance will be paid within 60 days.
During the first week of operations, merchandise that had cost $4,300 was sold for $6,200 cash.
A newspaper ad costing $120 was arranged for; it ran during the second week of the store's operations. The ad will be paid for in the next month.
Additional inventory costing $4,150 was purchased; cash of $1,300 was paid, and the balance is due in 30 days.
In the last three weeks of the first month, sales totaled $13,250, of which $9,300 was sold on account. The cost of the goods sold totaled $8,400.
Employee wages for the month totaled $1,900; these will be paid during the first week of the next month.
The firm collected a total of $3,350 from the sales on account recorded in transaction i.
The firm paid a total of $4,600 of the amount owed to suppliers from transaction e.

Required:

Record each transaction in the appropriate columns. Indicate the financial statement effect.
Calculate the total assets, liabilities, and stockholders' equity at the end of the month and calculate the amount of net income for the month.
After completing parts a through l, prepare an income statement for Blue Co. Stores Inc. for the month presented and a balance sheet at the end of the month.

BLUE CO. STORES INC.
Balance Sheet
Assets:
Total current assets
Total assets
Liabilities:
Total liabilities
Stockholders' Equity:
Total stockholders' equity
Total liabilities and stockholders' equity

Expert Solution

Introduction :

Assets = Liabilities + Stockholders equity

Assets = Cash + accounts receivables + Inventory + Equipment

Liabilities =Notes payable + accounts payable

Stockholders equity = Paid-in capital + Retained earnings

Net Income = Revenue - expenses

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