Michael Field start s a catering business near a college campus. The company is
ID: 2331192 • Letter: M
Question
Michael Field starts a catering business near a college campus. The company is named Homemade Cuisine. During the first month of operations, June 2018, the business completes severaltransactions as follows. Please record these transactions using journal entries:
a. Receives a $40,000 contribution from Michael Field and issues common stock to Michael Field (1 point)
b. Purchases $4,000 of kitchen equipment on account (1 point)
c. Pays cash of $9,000 for 3-month rent (June – July – August)(2 points)
d. Pays cash of $3,000 for food ingredients (1 point)
(Continued next page)
e. Serves customers and receives $11,000 in cash with the cost of $3,000 for food ingredients as in Transaction (d) (2 points)
f. Pays cash of $2,000 in salaries (1 point)
g. Pays $1,000 on the accounts payable the business created in Transaction (b) (1 point)
h. Pays cash of $1,000 for utilities (1 point)
Explanation / Answer
Note: For transaction c. the entire amount paid has been debited to prepaid rent in the absence of specific instructions. Rent expense for June is generally recorded at the time of adjusting entries which have not been asked for and hence not prepared. Please provide instructions in case the same is required. Thank you.
Transaction Account Titles and Explanation Debit Credit a. Cash 40000 Common stock 40000 (To record issuance of common stock) b. Kitchen equipment 4000 Accounts payable 4000 (To record kitchen equipment purchased on account) c. Prepaid rent 9000 Cash 9000 (To record rent paid for 3 months) d. Food ingredients inventory 3000 Cash 3000 (To record food ingredients purchased) e. Cash 11000 Sales revenue 11000 (To record cash sales) Cost of goods sold 3000 Food ingredients inventory 3000 (To record the cost of sales) f. Salaries expense 2000 Cash 2000 (To record salaries paid) g. Accounts payable 1000 Cash 1000 (To record payment on account) h. Utilities expense 1000 Cash 1000 (To record payment for utilities)