Question

The following events apply to Gulf Seafood for the Year 1 fiscal year:

1. The company started when it acquired $30,000 cash by issuing common stock.
2. Purchased a new cooktop that cost $12,900 cash.
3. Earned $22,100 in cash revenue.
4. Paid $12,900 cash for salaries expense.
5. Adjusted the records to reflect the use of the cooktop. Purchased on January 1, Year 1, the cooktop has an expected useful life of five years and an estimated salvage value of $3,300. Use straight-line depreciation. The adjusting entry was made as of December 31, Year 1.

Record the events in general journal format and post to T-accounts. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Answer 1

Gulf Seafood's fiscal year 1 transactions include issuing stock, purchasing equipment, earning revenue, paying salaries, and recording depreciation. Journal entries were demonstrated step by step, showing the effect on T-accounts for assets, liabilities, and equity.

Step-by-step explanation:

To record the fiscal year events for Gulf Seafood, we must understand each transaction's impact on the financial statements. I'll do this step by step in general journal format and post the entries to T-accounts accordingly.

1. Cash (common stock issuance): Debit Cash $30,000 | Credit Common Stock $30,000.
2. Cooktop purchase: Debit Equipment $12,900 | Credit Cash $12,900.
3. Cash revenue earned: Debit Cash $22,100 | Credit Revenue $22,100.
4. Salaries expense paid: Debit Salaries Expense $12,900 | Credit Cash $12,900.
5. Depreciation of cooktop: The cooktop's cost is $12,900 with a salvage value of $3,300, giving us a depreciable base of $9,600 over a 5-year life. Straight-line depreciation is $9,600 / 5 = $1,920 per year. The adjusting entry would be: Debit Depreciation Expense $1,920 | Credit Accumulated Depreciation $1,920.

After posting these transactions to the respective T-accounts, one can determine the impact on Gulf Seafood's assets, liabilities, and equity, and prepare financial statements accordingly.