Question

The following information has been given by Put Put Inc. The information covers an accounting period from January 1^st – December 31^st of its second year in operation.

Balance Sheet of accounts as of Jan 1^st –

Accounts Payable                                                             $75,000

Accounts Receivable                                                       $125,000

Accumulated Depreciation – Display Cases            $20,000

Allowance for Uncollectable Accounts                    $10,000

Cash                                                                                      $850,000

Common Stock                                                                  $700,000

Merchandise Display Cases                                          $200,000

Inventory (12,000 putters x $50/putter)                 $600,000

Note Payable (Due in 3 years)                                     $200,000

Retained Earnings                                                            $720,000

Wage Payable                                                                   $50,000

Business Activity, Inventory Purchases --- Jan 1^st – Dec 10^th

Feb 1^st

                Bought 5,000 putters at $52/putter; payment made in cash

May 1^st

                Bought 9,000 putters at $55/putter; payment made in cash

Aug 1^st

                Bought 8,000 putters at $58/putter; payment made in cash

Nov 1^st

                Bought 4,000 putters at $60/putter; payment made in cash

Other Business Activity, Jan 1^st – Dec 10^th

                Sold 35,000 putters at $150/putter

                Of the above, $2,000,000 were credit sales, the remaining were cash sales

Put Put Inc. Collected $1,950,000 of the credit sales

$15,000 of the Accounts Receivable was written off as bad debt

Operating Expenses - $2,500,000, paid in cash

The Operating Expenses account included interest paid on the Note Payable

The Operating Expenses account does not include any amount for Uncollectible Accounts Expense or Depreciation Expense.

No changes in the following accounts: Accounts Payable, Common Stock, Merchandise Display Cases, Note Payable, Wage Payable

Other Information

                Income Tax Rate – 30%

                Periodic LIFO has been adopted to account for inventories

                The Aging Method is used to account for account receivables

Put Put Inc. States that the AFUA account should have a balance of $20,000 after the adjusting journal entry has been made.

Depreciation Method – Straight Line, No Residual Value

QUESTION:

1. Prepare all journal entries that would be made given the activity of the business between January 1st and December 10th. No adjusting journal entries are to be made at this time.

Answer 1

Date	Account Titles and Explanation	Debit	Credit
Feb-01	Purchases (5000 x $52)	260000
	Cash		260000
	(To record cash purchases)
May-01	Purchases (9000 x $55)	495000
	Cash		495000
	(To record cash purchases)
Aug-01	Purchases (8000 x $58)	464000
	Cash		464000
	(To record cash purchases)
Nov-01	Purchases (4000 x $60)	240000
	Cash		240000
	(To record cash purchases)
	Cash	3250000
	Accounts receivables	2000000
	Sales revenue (35000 x $150)		5250000
	(To record sales)
	Cash	1950000
	Accounts receivables		1950000
	(To record collections on account)
	Allowance for uncollectible accounts	15000
	Accounts receivables		15000
	(To record write-off of uncollectible receivables)
	Operating expense	2500000
	Cash		2500000
	(To record operating expenses paid in cash)