Question

Chapter 3 Problems Problem 3.1 Prepare journal entries for the following independent transactions: a) Issued common stock in exchange for $500,000. b) Paid monthly office rent for the past month at the end of the month of $15,000. c) Purchased a building for $2,500,000, paying $1,000,000 cash and signing a note payable for the balance. d) Purchased office supplies for $3,000 on account. e) Used office supplies that had previously cost $2,000. ) Declared a cash dividend of $15,000, payable next month. g) Paid a previously declared cash dividend of $20,000. h) Billed clients $50,000 for services performed. i) Paid and recorded salaries for a month of $22,000. j) Collected $25,000 on account from clients. k) Paid $20,000 on account to suppliers.

Answer 1

Required journal entries are:

Date	Description	Debit	Credit
a	Cash	500000
	Common stock
	(For common stock issued for cash)
b	Rent payable	15000
	Cash		15000
	(for previous month rant paid now)
c	Property, plant & equipment - Buildings	2500000
	Cash		1000000
	Note payable		1500000
	(for buildings purchased on cash & note payable issued)
d	Office supplies	3000
	Accounts payable		3000
	(for office supplies purchased)
e	Supplies expense	2000
	Office supplies		2000
	(for office supplies used)
f	Dividends	15000
	Dividends payable		15000
	(for dividends declared)
g	Dividend payable	20000
	Cash		20000
	(for dividend declared previously paid now)
h	Accounts receivable	50000
	Service revenue		50000
	(for services performed)
i	Salaries expense	22000
	Cash		22000
j	Cash	25000
	Accounts receivable		25000
	(for cash collected)
k	Accounts payable	20000
	Cash		20000
	(for payment to suppliers)