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Sam's Widget Shop$-$Merchandising $(200$ points$)$

Assets

Amount

Liabilities & Equity

Amount

Cash

$$100,000$

Accounts Payable

$$22,000$

Accounts Receivable

$35,000$

Notes Payable Short term

$65,000$

Supplies

$4,000$

Long Term Notes Payable

$95,000$

Inventory

$40,000$

Common Stock

$30,000$

Equipment

$200,000$

Additional Paid in Capital Common stock

$20,000$

Accumulated Depreciation$-$Equipment

$(40,000)$

Retained Earnings

$150,000$

Vehicle

$60,000$

Accumulated Depreciation$-$Vehicle

$(12,000)$

Land

$40,000$

Total Assets

$$387,000$

Total Liabilities & Equity

$$387,000$

Sam Rumor operates a widget shop. The shop specializes in a selection of various widget products. The following transactions occurred during January, of this year.

Received cash of $$40,000$ and $$60,000$ for machinery in exchange for common stock.

Paid six months' rent for the store at $$5,000$ per month $($five months are prepaid$).$

Purchased inventory for $$50,000$ on account $(2/10$ and n$/30$ days.$)$

Purchased supplies for $$7,700$ on account.

Made sales on account for $$98,000$ with the costs of $$49,000$ at $2/10,$ n$/30.$

Negotiated and signed a two$-$year $$100,000$ loan at the bank, receiving cash at the time.

Used the money from $($f$)$ to purchase several computers for $$7,500$; then used the balance for a vehicle$-$$$35,000$ and equipment$-$$$57,500$ for the shop.

Received payment for sales in $($e$)$ within the discount period.

Paid expenses: advertising expense of $$8,000$ and salaries of $$18,500.$

Made sales for cash totaling $$78,000$ with a costs of $$36,000.$

Made a payment on inventory accounts payable balance of $$40,000$ from transaction c above within the discount period.

Collected accounts receivable of $$28,000$ from customers after discount period.

Business is going well so issued more common stock. Sam purchased par value stock of $$10,000$ for $$20,000$ cash.

Record Deprecation: Help$-$all assets have no salvage value. Estimated useful lives: computers$-3$ years; machinery$-7$ years; vehicle$-5$ years; and for the equipment$-15$ years.

Received a cash payment for widgets in advance of $$25,000.$ Will deliver it next month.

Office supplies on hand at the end of month were $$3,000.$

REQUIRED:

Record the journal entries for each of the transactions and a trial balance.

Create an income statement at the end of the first month of operations ended January $31$ and a statement of retained earnings for the period ended January $31.$

Create a balance sheet as of January $31.$

Come up with a memo to Sam offering your opinion on the results of operations during the first month of business this year, January $1-31.$

After three years in business the following data was computed. Based on this information provide another memo$/$report to Sam on the performance of the shop for the past $3$ years. $($Don$\text{'}$t forget to include ratios.$)$

Year

$2020$

$2021$

$2022$

Total Assets

$$152,500$

$$208,500$

$$227,000$

Total Liabilities

$78,500$

$82,000$

$97,000$

Total Equity

$74,000$

$126,500$

$130,000$

Sales Revenue

$255,000$

$242,500$

$233,500$

Net Income

$24,400$

$15,000$

$9,000$

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