Question

Pharoah Company was started on May 1. A summary of May transactions is presented as follows. 1. Stockholders invested $24,500 cash in the business in exchange for common stock. 2. Purchased equipment for $4,500 cash. 3. Paid $200 cash for May office rent. 4. Paid $600 cash for supplies. 5. Incurred $350 of advertising costs in the Beacon News on account. 6. Received $4,900 in cash from customers for repair service. 7. Declared and paid a $1,000 cash dividend.

Answer 1

1. Stockholders invested $24,500 cash in the business in exchange for common stock.

Dr Cash 24,500

Cr Common stock 24,500

2. Purchased equipment for $4,500 cash.

Dr Equipment 4,500

Cr Cash 4,500

3. Paid $200 cash for May office rent.

Dr Rent expense 200

Cr Cash 200

4. Paid $600 cash for supplies.

Dr Supplies 600

Cr Cash 600

5. Incurred $350 of advertising costs in the Beacon News on account.

Dr Advertising expense 350

Cr Accounts payable 350

6. Received $4,900 in cash from customers for repair service.

Dr Cash 4,900

Cr Service revenue 4,900

7. Declared and paid a $1,000 cash dividend.

Dr Dividends 1,000

Cr Cash 1,000