Explanation Journal entry : Journal entry is a set of economic events which can be measured in monetary terms. These are recorded chronologically and systematically. Rules of Debit and Credit: Following rules are followed for debiting and crediting different accounts while they occur in business transactions: Debit , all increase in assets, expenses and dividends, all decrease in liabilities, revenues and equities. Credit, all increase in liabilities, revenues, and equities, all decrease in assets, and expenses. Prepare the journal entries for the given transactions as follows: a. Owner invested $6,000 cash, $7,600 of equipment, and $12,000 of automobiles in the exchange for common stock Date Account Title and Explanation Post Ref. Debit ($) Credit ($) Cash 6,000 Equipment 7,600 Automobiles 12,000 Common Stock 25,600 (To record owner invested cash, web servers and equipment for stock) Table (1) Cash is an asset account, and it increases the value of assets by $6,000. Hence, debit the cash account for $6,000. Equipment is an asset account, and it increases the value of assets by $7,600. Hence, debit the equipment account for $7,600. Automobiles are asset account, and it increases the value of assets by $12,000. Hence, debit the automobiles account for $12,000. Common stock is a component of equity, and it increases the value of equity by $25,600. Hence, credit the common stock account for $25,600. b. The Company paid advance cash for $4,800 cash for an insurance. Date Account Title and Explanation Post Ref. Debit ($) Credit ($) Prepaid insurance 4,800 Cash 4,800 (To record prepaid insurance paid in cash) Table (2) Prepaid insurance is an asset account, and it increases the value of assets by $4,800. Hence, debit the prepaid insurance account for $4,800. Cash is an asset account, and it decreases the value of assets by $4,800. Hence, credit the cash account for $4,800. c. Company purchased office supplies for $900 cash. Date Account Title and Explanation Post Ref. Debit ($) Credit ($) Office supplies 900 Cash 900 (To record office supplies purchased in cash) Table (3) Office supplies are asset account, and it increases the value of assets by $900. Hence, debit the office supplies account for $900. Cash is an asset account, and it decreases the value of assets by $900. Hence, credit the cash account for $900. d. Company purchased office supplies and equipment for $10,000 cash...

5th Edition

ISBN: 9780078025754

Author: John Wild

Publisher: McGraw-Hill/Irwin

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Question

Chapter 2, Problem 14E

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Prepare the journal entries for the given transactions.

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Chapter 2, Problem 13E

Chapter 2, Problem 15E

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Chapter 2 Solutions

Financial Accounting Fundamentals:

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