ACCT 3311 FALL 2007 PAGE 3-1
Example 1. Jim Kaufman and Ron Bruckman started a business in January of 2006. The following
transactions occurred during 2006:
Jan. 2 The KB Corporation was formed. 10,000 shares of common stock were issued for $10 per
Jan. 3 The Corporation borrowed $50,000 by signing a three year 10% note with interest payable
each January 3 (first payment due 1-3-2007)
Jan. 4 The Corporation signed a one year lease on an office. $24,000 rent was paid for the year.
Jan. 5 The Corporation purchased office furniture for $30,000. The furniture will be written off over
five years with no salvage value.
Jan. 5 The Corporation purchased computers, printers, fax machines, etc., for $27,000. These will
be written off over three years with no salvage value.
Jan. 5 A one year insurance policy was purchased for $4,000.
The following occurred during 2006:
At the end of 2006, KB estimated that uncollectible accounts would amount to $1,000 on the
outstanding receivables at year end. A year end inventory showed $1,500 of supplies were still on
hand. KB estimated a quarterly tax payment of $4,000 would be made in the first quarter of 2007 for
1. Prepare journal entries for the above transactions.
2. Prepare an income statement for 2006.
3. Prepare a balance sheet at 12-31-2006.
ACCT 3311 FALL 2007 PAGE 3-2
T ACCOUNTS FOR JIM KAUFMAN EXAMPLE
Cash Accounts receivable Allowance for uncoll. Accts
Acc. Deprec. Furniture
Supplies were purchased on account for $5,000.
Wages and salaries of 32,000 were paid during 2006.
Utility bills of $3,000 were received.
Merchandise costing $80,000 was purchased on account.
Merchandise costing $60,000 was sold on account for $190,000 during 2006.
Customers paid $95,000 for the purchases at year end.
Accounts payable totaling $74,000 were paid during the year.
Income taxes of $8,000 were paid during 2006.
Dividends of $15,000 were declared on December 15, 2006, to be paid in January of 2007.