Chapter 4, Problem 4.2P

Transaction Analysis; Journal Entries; Adjusting Journal Entries. Branton Stores began operations on January 1, 2018. Branton had the following transactions in its first year of business:

• January 4: Owners invested $400,000 (the par value of the stock) in exchange for 40,000 shares of common stock.
• January 31: Branton purchased an office building for $320,000 and paid for the purchase with a note payable. Interest in the amount of $16,000 will be due annually on January 31 of each year, beginning in 2019.
• February 1: Branton rented out a portion of its office building to another company. The renter signed a rental lease for the period of February 1, 2018, to January 31, 2019, and paid the annual rent amount of $60,000 upfront in cash.
• March 1: Branton paid $12,000 cash for administrative expenses.
• March 28: Branton purchased supplies in the amount of $42,000 on account with the supplier.
• April 8: Branton purchased a one-year insurance policy that runs from May 1, 2018, to April 30, 2019, in the amount of $62,000 and paid for the policy in full in cash.
• May 1: Branton recorded sales revenue in the amount of $240,000 that was received in cash from customers. Ignore Cost of Goods Sold.
• July 6: Branton paid employees $34,000 in wages in cash.
• September 30: Branton recorded $320,000 in sales revenue. Of this amount, $200,000 was paid in cash and the remainder was on account. Ignore Cost of Goods Sold.
• October 31: Branton received a cash payment from a customer in the amount of $40,000 to be applied to its account balance related to the September 30 sale.
• November 15: Branton purchased supplies in the amount of $26,000 on account with the vendor.
• December 1: Branton recorded sales revenue in the amount of $222,000, all on credit. Ignore Cost of Goods Sold
• December 22: Branton received a legal bill for $14,000, which it will pay when due in February 2019.

Note: Branton records straight-line depreciation on buildings, using a 32-year life and a salvage value of zero. At year-end, wages for 2018 in the amount of $86,000 are due to employees and will be paid in January 2019. Supplies in the amount of $6,000 remain on hand on December 31.

Required

1. a. Prepare the journal entries for the transactions. Omit explanations.
2. b. Show the accounting equation effect of each of these transactions.
3. c. Prepare any necessary year-end adjusting journal entries for these transactions.
4. d. Show the accounting equation effect of each of the adjusting journal entries.