Question

The following events occurred for Favata Company: Received $12,000 cash from owners and issued stock to them. Borrowed $9,000 cash from a bank and signed a note due later this year. Bought and received $1,000 of equipment on account. Purchased land for $16,000; paid $1,400 in cash and signed a long-term note for $14,600. Purchased $5,000 of equipment; paid $1,400 in cash and charged the rest on account. Required: For each of the events in above, prepare journal entries. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)

Answer 1

The journal entries is as follows:

(1) Received $12,000 cash from owners and issued stock to them

Cash A/C Dr. $12,000

To Stock capital a/c $12,000

(2) Borrowed $9,000 cash from a bank and signed a note due later this year.

Cash a/c Dr. $9,000

To Notes Payable(short term) $9,000

(3) Bought and received $1,000 of equipment on account.

Equipment a/c Dr. $1,000

To Vendor's a/c $1,000

(4) Purchased land for $16,000; paid $1,400 in cash and signed a long-term note for $14,600.

Land a/c Dr. $16,000

To cash a/c $1,400

To Note payable(long term) $14,600

(5) Purchased $5,000 of equipment; paid $1,400 in cash and charged the rest on account.

Equipment a/c Dr. $5,000

To cash a/c $1,400

To Vendor's a/c $3,600