Susan’s Sweets opened a candy shop on January 1. 1. Susan invested $100,000 in cash on January 1, 1999, and began business as a sole proprietorship.
2. Susan paid $20,000 for a six-month lease. The lease is renewable for another six months on July 1.
3. Susan purchased candy and other “sweetmeats” at a cost of $40,000 in cash.
4. Susan purchased store fixtures at a cost of $15,000, paying $5,000 in cash. These store fixtures have a useful life of five years, with no expected salvage value.
5. During the first month of operations, Susan’s sales totaled $32,000. At the end of the first month, her outstanding accounts receivable were only $1,500. Her cost of sales was $9,500.
6. During the first month, her other operating expenses were $37,300 on account. She also paid herself a “salary” of $10,000, which was really a withdrawal.
7. Susan recorded depreciation for the first year.
Required
a. Prepare the journal entries to record these transactions.
b. Prepare any necessary adjusting entries (such as rent expense).
c. Post the entries to T-accounts.
d. Prepare a trial balance.
e. Prepare an income statement and balance sheet for Susan’s Sweets to “tell the story” of the first month’s operations.
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