Question

Question 3 Identifying Transactions and Preparing Journal Bengal Corporation was formed on July 1, 2017. Prepare journal entries for the following events If an event is not a transaction write "no transaction. Use the following accounts • Accounts Payable • Accounts Receivable • Cash • Common Stock • Equipment • Land • Notes Payable (long-term) Notes Payable (short-term) • Supplies a) Received $70,000 cash invested by owners and issued common stock b) A lumber supplier delivered lumber supplies to Bengal for future use. The lumber supplies would have normally sold for $8,000, but the supplier gave Bengal a 12% discount, Bangel has not yet received the bill from the supplier. c) Borrowed $25,000 from the bank with a plan to use the funds to build a small workshop in August. The loan must be repaid in two years. d) One of the owners sold $10,000 worth of his common stock to another shareholder for $11,000 e) Bengal bought $7,000 worth of inventory from a publisher. The company will pay the publisher within 45-60 days.

Answer 1

Journal entries in the books of Bengal corporations А Cash A/C DR To Common stock A/C (Stock issued for cash) $70.000 $70.000 $7.040 $7.040 Supplies A/C Dr To Accounts Payable A/C (supplies purchased on credit) 58000-10%of 8000 is $7040 (since discount given by supplier is cash discount it is not needed to recognise seperately in entry instead it is directly adjusted to the supplies value) Cash A/C dr $25.000 To Accounts payable A/C $25.000 (cash borrowed from Bank) since loan has to be repaid after two years amount is credited to Bankloan because of lack of accounts it is credited to accounts payable "No Transaction" since the transaction is between existing shareholder and an outsider no entry is required in the books of company. At the time of first issue company has recognised the issue Supplies A/C DI To Accounts payable A/C (supplies purchased for credit) $7.000 $7.000 Accounts payable A/C Dr To Cash A/C (paid $1500 to Accounts payable) $1.500 $1.500 "No Transaction" since the employee is hired from next month no entry in the current month Land A/C DR $12.000 To Cash A/C | $1.000 To Notespayable(Longterm) A/C $11.000 (Purchase land on partial payment of cash and remaining in instrument) Accounts payable A/C Dr $5.000 To Cash A/C $5.000 (bankloan repaid) it is assumed that bankloan is credited at the time of taking loan due to the availability of selective accounts Bank loan should have been credited at the first if so no confuse arise Equipment A/C Dr $3.000 To Cash A/C $1.000 To Accounts payable $2.000 (equipment purchased and partial payment made in cash)