Prepare journal entries to record each of the following transactions. Determine
ID: 2337418 • Letter: P
Question
Prepare journal entries to record each of the following transactions. Determine the effect of each transaction on net income and cash flows.
Issued common stock for $250,000.
Purchased land for $100,000 in cash.
Purchased $11,000 of supplies on account.
Rendered $10,000 services to clients and received immediate payment.
Paid $900 on accounts payable.
Rendered $25,000 of services to clients on account.
Paid $2,000 in dividends.
Received $3,000 cash in exchange for services to be rendered in 3 months.
Received $500 cash on a customer’s account.
Used up supplies of $1,000 during the accounting period.
Received property tax bill for $3,000 payable in 60 days.
Explanation / Answer
Accounts Title & Explanation
Debit
Credit
Effect on net income
Effect on cash flows
Cash
$250000
No Effect
Inflow of cash (Financing)
Common Stock
$250000
Land
$100000
No effect
Outflow of cash (Financing)
Cash
$100000
Supplies
$11000
No effect
Infow of cash (Operating)
Accounts Payable
$11000
Cash
$10000
Increase
Infow of cash (Operating)
Service Revenue
$10000
Accounts Payable
$900
No effect
Outflow of cash (Operating)
Cash
$900
Accounts Receivable
$25000
Increase
Outflow of cash (Operating)
Service Revenue
$25000
Dividends
$2000
No effect
Outflow of cash (Financing)
Cash
$2000
Cash
$3000
No effect
Infow of cash (Operating)
Unearned Service Revenue
$3000
Cash
$500
No effect
Infow of cash (Operating)
Accounts Receivable
$500
Supplies Expense
$1000
Decrease
No effect
Supplies
$1000
Property tax expenses
$3000
Decrease
Infow of cash (Operating)
Property tax payable
$3000
Accounts Title & Explanation
Debit
Credit
Effect on net income
Effect on cash flows
Cash
$250000
No Effect
Inflow of cash (Financing)
Common Stock
$250000
Land
$100000
No effect
Outflow of cash (Financing)
Cash
$100000
Supplies
$11000
No effect
Infow of cash (Operating)
Accounts Payable
$11000
Cash
$10000
Increase
Infow of cash (Operating)
Service Revenue
$10000
Accounts Payable
$900
No effect
Outflow of cash (Operating)
Cash
$900
Accounts Receivable
$25000
Increase
Outflow of cash (Operating)
Service Revenue
$25000
Dividends
$2000
No effect
Outflow of cash (Financing)
Cash
$2000
Cash
$3000
No effect
Infow of cash (Operating)
Unearned Service Revenue
$3000
Cash
$500
No effect
Infow of cash (Operating)
Accounts Receivable
$500
Supplies Expense
$1000
Decrease
No effect
Supplies
$1000
Property tax expenses
$3000
Decrease
Infow of cash (Operating)
Property tax payable
$3000