Question

The following transactions occurred at the Daisy King Ice Cream Company.

1. Started business by issuing 10,000 shares of capital stock for $23,000.
2. Signed a franchise agreement to pay royalties of 5% of sales.
3. Leased a building for three years at $530 per month and paid six months' rent in advance.
4. Purchased equipment for $5,700, paying $2,000 down and signing a two-year, 10% note for the balance.
5. Purchased $2,100 of supplies on account.
6. Recorded cash sales of $1,100 for the first week.
7. Paid weekly salaries and wages, $470.
8. Paid for supplies purchased in item (5).
9. Paid royalties due on first week's sales.
10. Recorded depreciation on equipment, $70.
Required: Prepare journal entries to record each of the transactions listed above.

Answer 1

To record the transactions for the Daisy King Ice Cream Company, journal entries should be made for each transaction.

Step-by-step explanation:

To record the transactions listed above, the following journal entries should be made:

1. Started business by issuing 10,000 shares of capital stock for $23,000:
   Stock Cash
   Debit: $23,000 Credit: $23,000
   
2. Signed a franchise agreement to pay royalties of 5% of sales:
   Royalties Expense Accounts Payable
   Debit: Sales x 5% Credit: Sales x 5%
   
3. Leased a building for three years at $530 per month and paid six months' rent in advance:
   Prepaid Rent Cash
   Debit: $3,180 Credit: $3,180
   
4. Purchased equipment for $5,700, paying $2,000 down and signing a two-year, 10% note for the balance:
   Equipment Notes Payable Cash
   Debit: $5,700 Credit: $2,000 Credit: $3,700
   
5. Purchased $2,100 of supplies on account:
   Supplies Accounts Payable
   Debit: $2,100 Credit: $2,100
   
6. Recorded cash sales of $1,100 for the first week:
   Cash Sales Revenue
   Debit: $1,100 Credit: $1,100
   
7. Paid weekly salaries and wages, $470:
   Salaries and Wages Cash
   Debit: $470 Credit: $470
   
8. Paid for supplies purchased in item (5):
   Accounts Payable Cash
   Debit: $2,100 Credit: $2,100
   
9. Paid royalties due on first week's sales:
   Royalties Expense Cash
   Debit: Royalties Due Credit: Royalties Due
   
10. Recorded depreciation on equipment, $70:
    Depreciation Expense Accumulated Depreciation-Equipment
    Debit: $70 Credit: $70