Question

Ryan Terlecki organized a new Internet company, CapUniverse, Inc. The company specializes in baseball-type caps with logos printed on them. Ryan, who is never without a cap, believes that his target market is college and high school students. You have been hired to record the transactions occurring in the first month of operations.

A. Issued 2,300 shares of $0.01 par value common stock to investors for cash at $23 per share.
B. Borrowed $62,000 from the bank to provide additional funding to begin operations; the note is due in two years.
C. Paid $2,300 cash for rent of a warehouse: $1,150 for the current month’s rent and another $1,150 for next month’s rent.
D. Paid $1,560 for a one-year fire insurance policy on the warehouse (recorded as a prepaid expense).
E. Purchased furniture and fixtures for the warehouse for $17,000, paying $3,500 cash and the rest on account. The amount is due within 30 days. F. Purchased for $3,100 cash The University of Pennsylvania, Notre Dame, The University of Texas at Austin, The Ohio State University, and Michigan State University baseball caps as inventory to sell online.
G. Placed advertisements on Google for a total of $260 cash; the ads were run immediately.
H. Sold caps totaling $2,300, half of which was charged on account. The cost of the caps sold was $1,500. (Hint: Make two entries.)
I. Made full payment for the furniture and fixtures purchased on account in.
J. Received $250 from a customer on account.
Required:_____
For each of the transactions, prepare journal entries. Be sure to categorize each account as an asset (A), liability (L). stockholders' equity (SE). revenue (R), or expense (E). Note that transaction(h). will require two entries, one for revenue and one for the related expense.

Answer 1

A. Issued 2,300 shares of $0.01 par value common stock to investors for cash at $23 per share.

Dr Cash (A) 52,900

Cr Common stock (SE) 23

Cr Additional paid in capital (SE) 52,877

B. Borrowed $62,000 from the bank to provide additional funding to begin operations; the note is due in two years.

Dr Cash (A) 62,000

Cr Notes payable (L) 62,000

C. Paid $2,300 cash for rent of a warehouse: $1,150 for the current month’s rent and another $1,150 for next month’s rent.

Dr Rent expense (E) 1,150

Dr Prepaid rent (A) 1,150

Cr Cash (A) 2,300

D. Paid $1,560 for a one-year fire insurance policy on the warehouse (recorded as a prepaid expense).

Dr Prepaid insurance (A) 1,560

Cr Cash (A) 1,560

E. Purchased furniture and fixtures for the warehouse for $17,000, paying $3,500 cash and the rest on account. The amount is due within 30 days.

Dr FF&E (A) 17,000

Cr Cash (A) 3,500

Cr Accounts payable (L) 13,500

F. Purchased for $3,100 cash The University of Pennsylvania, Notre Dame, The University of Texas at Austin, The Ohio State University, and Michigan State University baseball caps as inventory to sell online.

Dr Merchandise inventory (A) 3,100

Cr Cash (A) 3,100

G. Placed advertisements on Google for a total of $260 cash; the ads were run immediately.

Dr Advertisement expense (E) 260

Cr Cash (A) 260

H. Sold caps totaling $2,300, half of which was charged on account. The cost of the caps sold was $1,500. (Hint: Make two entries.)

Dr Cash (A) 1,150

Dr Accounts receivable (A) 1,150

Cr Sales revenue (R) 2,300

Dr Cost of goods sold (E) 1,500

Cr Merchandise inventory (A) 1,500

I. Made full payment for the furniture and fixtures purchased on account in.

Dr Accounts payable (L) 13,500

Cr Cash (A) 13,500

J. Received $250 from a customer on account.

Dr Cash (A) 250

Cr Accounts receivable (A) 250