Assume you are interviewing for a part-time accounting job at Spilker & Associates, Inc., and the interviewer gives you the following list of company transactions in September 2006.
Sept. 1 Received $150,000 for capital stock issued.
Sept 2 Paid $20,000 cash to employees for wages earned in September 2006.
Sept 4 Purchased $75,000 of running shoes and clothing on account for resale.
Sept 5 Paid utilities of $1,800 for September 2006.
Sept 9 Paid $1,500 cash for September's insurance premium.
Sept 11 Sold inventory of running shoes and clothing costing $35,000 for $70,000, with $20,000 received in cash and the remaining balance on credit.
Sept 15 Purchased $2,500 of supplies on account.
Sept 21 Received $25,000 from customers as payments on their accounts.
Sept 25 Paid $75,000 of accounts payable.
Using this list, you have been asked to do the following in the interview:
1. Journalize each of the transactions for September. (Omit explanations.)
2. Interpretive Question: If the business owners wanted to know at any given time how much cash the company had, where would you tell the owners to look? Why?
See Excel for clarity.
Date Description Debit Credit
1-Sep Cash 150,000
Capital Stock 150,000
2-Sep Wages 20,000
4-Sep Inventory 75,000
Accounts payable 75,000
5-Sep Utilities expense 1,800
9-Sep Prepaid insurance 1,500
Note: this could be insurance ...
The solution presents the journal entries for September for Spilker & Associates in Excel. Following is a short discussion in response to the question about cash balances. There are six possible methods to determine the cash position of the company.