Question

The following information is provided for Pepper's Eatery at December 31, 2018. Adjusted Trial Balance Accounts payable Accounts receivable Cash Common stock (par S1) Inventory Land Long-term notes payable Prepaid expenses Plant& Equipment Retained earnings Supplies Short-term notes payable Short-term investments Utilities payable $32,500 40,000 7,000 7,680 2,500 40,000 2,000 3,340 17,200 16,200 1,500 54,700 2,800 1,260 Pepper's entered into the following transactions during January 2019 1. Received $40,000 from customers for services provided in December 2018. 2. Paid $8.450 in advance for 3 months of rent. 3. Purchased inventory of $9,500 on account. 4. Issued 10,500 shares of common stock for $30,000. 5. Paid $1,260 for utilities incurred in December 2018 6. Purchased US Bonds for $6,000 redeemable 1/31/22 7. Sold land in exchange for $4,200 cash and a $25,000 note due 4/1/19. 8. Paid $8,275 in exchange for a pizza oven 9. Signed a $10,800 six-month notes payable for the CEO's personal use. 10. Declared and paid dividends of $3,000.

Answer 1

A	B	C	D	E	F	G	H	I
2
3		a)
4
5		In the journal entry, increase in assets is debited and increase in liabilities is credited.
6
7		Thus the journal entries will be as follows:
8
9		Transaction	Accounts	Debit	Credit
10		1	Cash	$40,000
11			Accounts Receivable		$40,000
12
13		2	Prepaid Rent	$8,450
14			Cash		$8,450
15
16		3	Inventory	$9,500
17			Accounts Payable		$9,500
18
19		4	Cash	$30,000
20			Common Stock		$30,000
21
22		5	Utilities Expense	$1,260
23			Cash		$1,260
24
25		6	Long-term investments	$6,000
26			Cash		$6,000
27
28		7	Cash	$4,200
29			Notes Receivable	$25,000
30			Land		$29,200
31
32		8	Plant and equipment	$8,275
33			Cash		$8,275
34
35		9	Salary and Other Benefits Expense	$10,800
36			Notes Payable		$10,800
37
38		10	Dividends	$3,000
39			Cash		$3,000
40