The transactions relating to the formation of Blue Co. Stores Inc., and its first month of operations follow. a. The firm was organized and the stockholders invested cash of $8,200. b. The firm borrowed $5,000 from the bank; a short-term note was signed. c. Display cases and other store equipment costing $1,750 were purchased for cash. The original list price of the equipment was $1,970, but a discount was received because the seller was having a sale. d. A store location was rented, and $1,350 was paid for the first month's rent. e. Inventory of $15,800 was purchased; $9,900 cash was paid to the suppliers, and the balance will be paid within 60 days. f. During the first week of operations, merchandise that had cost $4,500 was sold for $5,900 cash. g. A newspaper ad costing $130 was arranged for; it ran during the second week of the store's operations. The ad will be paid for in the next month. h. Additional inventory costing $4,300 was purchased; cash of $1,200 was paid, and the balance is due in 30 days. i. In the last three weeks of the first month, sales totaled $13,500, of which $9,800 was sold on account. The cost of the goods sold totaled $9,000. j. Employee wages for the month totaled $1,900; these will be paid during the first week of the next month. k. The firm collected a total of $3,200 from the sales on account recorded in transaction i. I. The firm paid a total of $4,200 of the amount owed to suppliers from transaction e. Required: a. Record each transaction in the appropriate columns. Indicate the financial statement effect. Pr.ex 1 of 10 CHE Next >

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Description: The accounting equation represents that assets equal to sum of liabilities and equity. The transactions affect two or more accounts of the business in a manner that accounting equation remains balanced. The shareholders' equity comprises paid in capi

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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The accounting equation represents that assets equal to sum of liabilities and equity. The transactions affect two or more accounts of the business in a manner that accounting equation remains balanced. The shareholders' equity comprises paid in capital, retained earnings, etc.

The transactions relating to the formation of Blue Co. Stores Inc., and its first month of operations follow.
a. The firm was organized and the stockholders invested cash of $8,200.
b. The firm borrowed $5,000 from the bank; a short-term note was signed.
c. Display cases and other store equipment costing $1,750 were purchased for cash. The original list price of the equipment was
$1,970, but a discount was received because the seller was having a sale.
d. A store location was rented, and $1,350 was paid for the first month's rent.
e. Inventory of $15,800 was purchased; $9,900 cash was paid to the suppliers, and the balance will be paid within 60 days.
f. During the first week of operations, merchandise that had cost $4,500 was sold for $5,900 cash.
g. A newspaper ad costing $130 was arranged for; it ran during the second week of the store's operations. The ad will be paid for in
the next month.
h. Additional inventory costing $4,300 was purchased; cash of $1,200 was paid, and the balance is due in 30 days.
i. In the last three weeks of the first month, sales totaled $13,500, of which $9,800 was sold on account. The cost of the goods sold
totaled $9,000.
j. Employee wages for the month totaled $1,900; these will be paid during the first week of the next month.
k. The firm collected a total of $3,200 from the sales on account recorded in transaction i.
1. The firm paid a total of $4,200 of the amount owed to suppliers from transaction e.
Required:
a. Record each transaction in the appropriate columns. Indicate the financial statement effect.
P.r.ex
1 of 10
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H
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Feb 26

After completing parts a through I, prepare an income statement for Blue Co. Stores Inc. for the month presented. (Enter
decreases with a minus sign to indicate a negative income statement effect.)
BLUE CO. STORES INC.
Income Statement Effect
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Expert Solution

Step 1 Introduction

Accounting Equation :— This equation shows how assets, liabilities and stockholders equity are related to each other.

According to Accounting Equation,

Assets = Liabilities + Equity

Income Statement :— It is one of the financial statement that shows profitability, total revenue and total expenses of company.

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