Answer:
1. Issuance of stock is increase in capital and cash asset by $30,000
Dr Cash Asset $30,000
Cr Equity $30,000
2. Payment of rental expenses on 1 January, 2018 means that there is no outstanding accrued expense in the accounts. So amount paid is decrease in cash asset and increase in expense.
Dr Rental expenses $2500
Cr Cash Account $2500
3. The purchases of the automobile is increase in the non current asset. The price of the automobile is $28500 of which $6000 is been paid and the remainder is financed from note payable.
This means cash asset is been reduced by $6000, Non current asset has been increased by $28500 and increase in Note payable (current liability) is by $22500.
Dr Car $28500
Cr Cash Account $6000
Cr Note Payable $22500
4. The purchases of the office equipment accounts to $8000 which is increase in non current asset and decrease in the current asset which is cash asset.
Dr Office Equipment $8000
Cr Cash account $8000
5. The payment made for the supplies is the payment made to suppliers whose invoices we had received. So it means their is outstanding debt which we owe to supplier in the accounts. The cash payment reduced the asset which must be credited against decrease in the liability which must be debited.
Dr Trade Payable $2100
Cr Cash Account $2100
6. Annual insurance payment made is an expense and insurance expense must be debited whereas cash paid is decrease in asset which must be credited.
Dr Insurance Expense $3600
Cr Cash Account $3600
7. Received cash for sales made is increase in sales and increase in cash asset. So increase in sales is always credited and increase in asset is always debited.
Dr Cash Asset $9000
Cr Sales account $9000
8. Cash paid for expenses is decrease in the asset and must be credited and increase in the expense which must be debited.
Dr Miscellaneous Expense $2600
Cr Cash Account $2600
9. The payment made to supplier is decrease in liability trade payable and also decrease in the cash asset.
Dr Trade Payable $4000
Cr Cash Account $4000
10. The installment due is reduction in the note payable and must be debited and cash paid is decrease in asset which must be credited.
Dr Note Payable $1875
Cr Cash Account $1875
11. The payment due to supplier must be recorded as accrued expense which would increase the expense and increase in the liability.
Dr Blueprint expenses $5500
Cr Accued Expense $5500
12. The income due to be received by the customer is accrued income and must be recorded as accrued income which is credited and there is also increase in the receiveable which is asset and must be debited
Dr Receivable $31400
Cr Accrued Income $31400
13. The payment made to employees is salary expenses and is increase in expense which must be debited and decrease in cash asset which must be credited.
Dr Salary Account $ 6000
Cr Cash Account $6000
14. The payment made for utility bills is utility expenses and is increase in expense which must be debited and decrease in cash asset which must be credited.
Dr Utility Expense $ 1300
Cr Cash Account $1300
