The Following Information Is Available for a Retail Store for the Month

question 88

Essay

The following information is available for a retail store for the month of February:
1.Wahlberg Computers sells computers for $2,500 each on account.On February 1,Wahlberg sold 20 computers.The cost of each computer sold was $1,000.The store uses the perpetual inventory system.
2.It is estimated that the warranty expense is 5% of gross sales.A journal entry is prepared on February 1.
3.During February,Wahlberg replaced two computers due to product warranty complaints for products purchased in a prior month.
4.A customer fell in the store and is seeking $100,000 in damages.Wahlberg's attorney believes the case is frivolous because the customer has similar lawsuits pending against other retail stores.
5.A customer is suing Wahlberg Computers for $100,000 because the customer's computer purchased from Wahlberg Computers started on fire and destroyed the customer's residence.Wahlberg's attorney believes the customer will probably win the case and receive $100,000.
Required: Prepare the journal entries to record the transactions above.Omit explanations.

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Definitions:

Capital Contribution

The sum of money or assets that the owners or shareholders provide to a company for its use in business operations.

Contribution

The act of providing a partial payment or service by a party among others towards a common goal or to make up for a joint liability.

Limited Partnership

A limited partnership is a form of partnership similar to a general partnership, except that in addition to one or more general partners, there are one or more limited partners who have limited liability to the extent of their investments and do not participate in the management of the business.

Promissory Note

A written promise to pay a specified sum of money to a designated person at a fixed or determinable future time.