Question

1. Prepare journal entries to record the following external transactions:

   Sell shares of common stock for $30,000 cash to obtain funds to start the business

   Borrow $20,000 from a bank and sign a note promising to repay the full amount in three years

   Purchase equipment for $10,000, making a down payment of 3,000 and placing the rest on account.

   Pay $9,000 cash in advance for one year of rent

   Perform $12,500 of services on account

   Perform $9,300 of services for cash

   Receive $3,000 cash in advance for services to be provided in the future

   Collect $10,000 cash in settlement of an account receivable

   Purchase $2,700 of supplies on account

   Purchase $900 of supplies and pay cash

   Pay $450 cash for advertising costs

   Incur $200 of utilities on account

   Pay off $1,900 of accounts payable

   Pay salaries of $1,500 to employees

   Pay $2,000 cash dividends to stockholders

Answer 1

General Journal	Debit	Credit
Cash	30,000
Common stock		30,000
( To record issuance of common stock)
Cash	20,000
Note payable		20,000
( To record issuance of note)
Equipment	10,000
Cash		3,000
Accounts payable		7,000
( To record purchase of equipment)
Prepaid rent	9,000
Cash		9,000
( To record payment of prepaid rent)
Accounts receivable	12,500
Service revenue		12,500
( To record service revenue)
Cash	9,300
Service revenue		9,300
( To record service revenue)
Cash	3,000
Unearned service revenue		3,000
( To record unearned service revenue earned)
Cash	10,000
Accounts receivable		10,000
( To record amount received from customers)
Supplies	2,700
Accounts payable		2,700
( To record purchase of supplies)
Supplies	900
Cash		900
( To record supplies purchased)
Advertising cost	450
Cash		450
( To record advertising cost)
Utilities expense	200
Utilities payable		200
( To record utilities expense)
Accounts payable	1,900
Cash		1,900
( To record payment of creditors)
Salaries expense	1,500
Cash		1,500
( To record salaries expense)
Cash dividends	2,000
Cash		2,000
( To record cash dividend paid)

Kindly comment if you need further assistance. Thanks