Anyaâ€™s Bookstore Part A - Year 1 of Operations

On 1st January 2015, Anya decided to set up a company, which would own and operate an antiquarian bookshop in Houston. She estimated that to put the business on a sound financial footing, she actually needed $40,000. Following are the details of transactions that took place in 2015: 1. January 1st : Anya contributed $10,000 and her friend (who is a 50% shareholder along with Anya) contributed $10,000 2. January 1st : Borrowed $20,000 from bank @ 15% per annum for 4 years. Interest will be paid at the end of the year. Assume loan will be paid on January 1, 2019. 3. February 5th : Rented a shop. Rental expenses of $3,000 would be paid in cash on December 31st. 4. February 11th: Purchased books on credit for $10,000 5. March 7th : Sold books originally costing $5,000 for $10,000 cash 6. June 12th : Purchased books costing $30,000 on credit 7. June 29th : Sold books originally costing $20,000 for $35,000 cash 8. October 9th : Paid $25,000 to trade creditors 9. December 31st : Paid salary to bookshop manager of $10,000 10. December 31st : Paid electricity bill of $2,000 11. December 31st : Paid interest on bank loan Record these transactions in the Year 1 worksheet provided. Prepare the income statement and balance sheet.

Sample Solution

These transactions are recorded in a general journal format, which is typically used to record the chronological order of business transactions.

General Journal Entries

Date	Account Debit	Account Credit	Amount
Jan 1	Cash	Owner's Capital (Anya)	$10,000
Jan 1	Cash	Owner's Capital (Friend)	$10,000
Jan 1	Notes Payable	Cash	$20,000
Feb 5	Rent Expense	Cash	$3,000
Feb 11	Inventory	Accounts Payable	$10,000
Mar 7	Cash	Sales Revenue	$10,000
Mar 7	Cost of Goods Sold	Inventory	$5,000
Jun 12	Inventory	Accounts Payable	$30,000
Jun 29	Cash	Sales Revenue	$35,000
Jun 29	Cost of Goods Sold	Inventory	$20,000
Oct 9	Accounts Payable	Cash	$25,000
Dec 31	Salary Expense	Cash	$10,000
Dec 31	Electricity Expense	Cash	$2,000
Dec 31	Interest Expense	Interest Payable	$3,000
Dec 31	Interest Payable	Cash	$3,000

Full Answer Section

Income Statement for the Year Ended December 31, 2015

| Revenue | | Expenses | | |---|---|---|---| | Sales Revenue | $45,000 | Cost of Goods Sold | $25,000 | | | | Salary Expense | $10,000 | | | | Rent Expense | $3,000 | | | | Electricity Expense | $2,000 | | | | Interest Expense | $3,000 | | Net Income | $2,000 | | |

Balance Sheet as of December 31, 2015

| Assets | | Liabilities | | |---|---|---|---| | Cash | $17,000 | Notes Payable | $20,000 | | Inventory | $15,000 | Accounts Payable | $0 | | Total Assets | $32,000 | Total Liabilities | $20,000 | | Owner's Equity | | | Owner's Capital (Anya) | $10,000 | | Owner's Capital (Friend) | $10,000 | | Total Owner's Equity | $20,000 | | | | Total Liabilities and Owner's Equity | $32,000 | | |

We are here to help

We have crazy offers

Itâ€™s quick and easy to place an order. We have an efficient customer service that works 24/7 to assist you.Itâ€™s quick and easy to place an order. We have an efficient customer service that works 24/7 to assist you.

We are here and ready to help

Order Now