Question

Use the horizontal model, or write the journal entry, for each of the following transactions and adjustments that occurred during the first year of operations at Kissick Co.Issued 260,000 shares of $7-par-value common stock for $1,820,000 in cash.Borrowed $560,000 from Oglesby National Bank and signed a 11% note due in two years.Incurred and paid $400,000 in salaries for the year.Purchased $660,000 of merchandise inventory on account during the year.Sold inventory costing $610,000 for a total of $970,000, all on credit.Paid rent of $220,000 on the sales facilities during the first 11 months of the year.Purchased $150,000 of store equipment, paying $54,000 in cash and agreeing to pay the difference within 90 days.Paid the entire $96,000 owed for store equipment and $610,000 of the amount due to suppliers for credit purchases previously recorded.Incurred and paid utilities expense of $45,000 during the year.Collected $825,000 in cash from customers during the year for credit sales previously recorded.At year-end, accrued $61,600 of interest on the note due to Oglesby National Bank.At year-end, accrued $20,000 of past-due December rent on the sales facilities.

Answer 1

Please see the detailed solution below:

Step-by-step explanation:

The difference between Journal entry and horizontal model is that the Journal entry system shows the Debit and Credit entries of the transaction with equal balance whereas Horizontal model shows the transactions effect on the Balance Sheet, Income Statement and the statement of Cash Flows horizontally.

Let us first see the Journal entries of the transactions given in the question.

Kissick Co.

Journal Entry

For Year 1

(a)

Dr. Cash $1,820,000

Cr. Common Stock $1,820,000

Issued common stock in cash.

(b)

Dr. Cash $560,000

Cr. Notes Payable $560,000

Borrowed cash from Oglesby National Bank on 2 years term at 11%.

(c)

Dr. Salaries Expense $400,000

Cr. Cash $400,000

Paid Salaries.

(d)

Dr. Merchandise Inventory $660,000

Cr. Accounts Payable $660,000

Purchases on Accounts.

(e)

Dr. Accounts Receivables $910,000

Cr. Sales $910,000

Sale on Credit.

Dr. Cost of Goods Sold $610,000

Cr. Merchandise Inventory $610,000

Inventory Sold.

(f)

Dr. Rent Expense $220,000

Cr. Cash $220,000

Paid Rent for 11 months.

(g)

Dr. Store Equipment $150,000

Cr. Cash $54,000

Cr. Accounts Payable $96,000

Purchased Store Equipment on Cash and remaining amount to be paid in 90 days.

(h)

Dr. Accounts Payable $706,000

Cr. Cash $706,000

Paid entire amount for Store Equipment and Purchases on Credit.

(i)

Dr. Utilities Expense $45,000

Cr. Cash $45,000

Paid for Utilities Expense.

(j)

Dr. Cash $825,000

Cr. Accounts Receivables $825,000

Collected Cash from Debtors.

(k)

Dr. Interest Expense $61,600

Cr. Interest Payable $61,600

Accrued Interest on loan borrowed from Oglesby National Bank.

Dr. Rent Expense $20,000

Cr. Rent Payable $20,000

Accrued rent expense on sales facilities.

For Horizontal Model please see the attached Solution.