Chapter 3, Problem 3.7MCP

Transaction Analysis and Journal Entries Recorded Directly in T Accounts

Four brothers organized Beverly Entertainment Enterprises on October 1. The following transactions occurred during the first month of operations:

October 1: Received contributions of $10,000 from each of the four principal owners of the new business in exchange for shares of stock.

October 2: Purchased the Ace Theater for $125,000. The seller agreed to accept a down payment of $12,500 and a seven-year promissory note for the balance. The Ace property consists of land valued at $35,000, and a building valued at $90,000.

October 3: Purchased new seats for the theater at a cost of $5,000, paying $2,500 down and agreeing to pay the remainder in 60 days.

October 12: Purchased candy, popcorn, cups, and napkins for $3,700 on an open account. The company has 30 days to pay for the concession supplies.

October 13: Sold tickets for the opening-night movie for cash of $1,800 and took in $2,400 at the concession stand.

October 17: Rented out the theater to a local community group for $1,500. The community group is to pay one-half of the bill within five working days and has 30 days to pay the remainder.

October 23: Received 50% of the amount billed to the community group.

October 24: Sold movie tickets for cash of $2,000 and took in $2,800 at the concession stand.

October 26: The four brothers, acting on behalf of Beverly Entertainment, paid a dividend of $750 on the shares of stock owned by each of them, or $3,000 in total.

October 27: Paid $500 for utilities.

October 30: Paid wages and salaries of $2,400 total to the ushers, projectionist, concession stand workers, and maintenance crew.

October 31: Sold movie tickets for cash of $1,800 and took in $2,500 at the concession stand.

Required

1. Prepare a table to summarize the preceding transactions as they affect the accounting equation. Use the format in Exhibit 3-1. Identify each transaction with a date.
2. Record each transaction directly in T accounts using the dates preceding the transactions to identify them in the accounts. Each account involved in the problem needs a separate T account.