Question # 4. Prepare journal entries to record the following transactions of Da
ID: 3595337 • Letter: Q
Question
Question # 4. Prepare journal entries to record the following transactions of Daisy King Ice Cream Company. If an entry is not required, state "No Entry."
1. Started business by issuing 10,000 shares of capital stock for $20,000.
2. Signed a franchise agreement to pay royalties of 5% of sales.
3. Leased a building for three years at $500 per month and paid six months' rent in advance.
4. Purchased equipment for $5,400, paying $1,000 down and signing a two-year, 10% note for the balance.
5. Purchased $1,800 of supplies on account.
6. Recorded cash sales of $800 for the first week.
7. Paid weekly salaries and wages, $320.
8. Paid for supplies purchased in item (5).
9. Paid royalties due on first week's sales.
10. Recorded depreciation on equipment, $50.
Question 1. The Marchetti Soup Company entered into the following transactions during the month of June:
purchased inventory on account for $165,000 (assume Marchetti uses a perpetual inventory system);
paid $40,000 in salaries to employees for work performed during the month;
sold merchandise that cost $120,000 to credit customers for $200,000;
collected $180,000 in cash from credit customers; and
paid suppliers of inventory $145,000.
Required:
Analyze each transaction and show the effect of each on the accounting equation for a corporation.
Prepare journal entries for each of the transactions
Post the journal entries prepared in T-accounts. Assume that the opening balances in each of the accounts is zero except for cash, accounts receivable, and accounts payable that had opening balances of $65,000, $43,000, and $22,000, respectively.
Explanation / Answer
T accounts
Statement of shareholder's equity
1) Cash $ 20,000 Common stock $ 20,000 2) No entry 3) Prepaid rent $ 3,000 Cash $ 3,000 4) Equipment $ 5,400 Cash $ 1,000 Notes payable at 10% $ 4,400 5) Supplies $ 1,800 Accounts payable $ 1,800 6) Cash $ 800 Sales revenue $ 800 7) Salaries expenses $ 320 Cash $ 320 8) Accounts Payable $ 1,800 Cash $ 1,800 9) Royalties Expenses $ 40 Cash $ 40 10) Depreciation Expenses $ 50 Accumulated depreciation $ 50