Question

Recording Journal Entries

Dynamic Corporation completed the following transactions during the month of March 2020. Prepare journal entries to record the transactions.

1. Issued 30,000 shares of its own common stock for $300,000 cash.
2. Borrowed $150,000 cash in return for a 9%, one-year note payable.
3. Purchased equipment at a net cash cost of $150,000 with cash.
4. Purchased inventory on account for $120,000. Assume that the company uses the perpetual inventory system.
5. Sold merchandise for $150,000 (and a cost of $90,000); collected $105,000 cash, and the balance is due in one month. Hint: Consider two parts to the transaction—one for sales and one for cost of goods sold.

6. Paid $37,500 cash for operating expenses.
7. Paid for half of the merchandise previously purchased on account in transaction 4.
8. Collected 40% of the balance due on the sales in transaction 5.
9. Paid cash for an insurance premium, $1,800 for one year of coverage (debit prepaid insurance).
10. Paid legal fees for the month of March, $15,000 cash.

Recording Journal Entries Dynamic Corporation completed the following transactions during the month of March 2020. Prepare journal entries to record the transactions. Transactions 1-5 Transactions 6-10 1. Issued 30,000 shares of its own common stock for $300,000 cash. 2. Borrowed $150,000 cash in return for a 9%, one-year note payable. 3. Purchased equipment at a net cash cost of $150,000 with cash. 4. Purchased inventory on account for $120,000. Assume that the company uses the perpetual inventory system. 5. Sold merchandise for $150,000 (and a cost of $90,000); collected $105,000 cash, and the balance is due in one month. Hint: Consider two parts to the transaction-one for sales and one for cost of goods sold. Account Name Dr. Cr. Ref. 1. 0 0 0 0 2. 0 0 0 0 3. 0 0 0 0 4. 0 0 0 0 5. Cash 0 0 0 0 0 0 To record the sale. 0 0 0 To record the cost of goods sold.

Answer 1

Solution:

Below are the journal entries as required :

Ref Credit Working Account Name Cash Common Stock Debit $300,000 1 $300,000 2 $150,000 Cash Note Payable $150,000 3 $150,000 Equipment Cash $150,000 4 $120,000 Inventory Accounts payable $120,000 5 $105,000 $45,000 Cash Accounts Receivable Sales Revenue (To record the sales ($150,000 - $105,000) $150,000 $90,000 Cost of goods sold Inventory (To record cost of goods sold) $90,000 6 $37,500 Operating Expense Cash $37,500 7 $60,000 Accounts payable Cash ($120,000' 1/2) $60,000 8 $18,000 ($45,000' 40%) Cash Accounts Receivable $18,000 9 $1,800 Prepaid Insurance Cash $1,800 10 $15,000 Legal Fee Cash $15,000