Question

The following transactions occurred during the month of June 2013 for the Stridewell Corporation. The company owns and operates a retail shoe store.a. Issued 100,000 shares of common stock in exchange for $500,000 cash.b. Purchased furniture and fixtures at a cost of $100,000. $40,000 was paid in cash and a note payable was signed for the balance owed.c. Purchased inventory on account at a cost of $200,000. The company uses the perpetual inventory system.d. Credit sales for the month totaled $280,000. The cost of the goods sold was $140,000.e. Paid $6,000 in rent on the store building for the month of June.f. Paid $3,000 to an insurance company for fire and liability insurance for a one-year period beginning June 1, 2013.g. Paid $120,000 on account for the merchandise purchased in transaction c.h. Collected $55,000 from customers on account.i. Paid shareholders a cash dividend of $5,000.j. Recorded depreciation expense of $2,000 for the month on the furniture and fixtures.k. Recorded the amount of prepaid insurance that expired for the month.Required:Prepare journal entries to record each of the transactions and events listed above. (If no entry is required for a particular transaction, select "No journal entry required" in the first account field.)

Answer 1

Answer and Explanation:

The Journal entries are prepared below:-

1. Cash Dr, $500,000

      To Common stock $100,000

      To Paid in capital of par $400,000

(Being issue of shares in excess of par is recorded)

2. Furniture and fixtures Dr, $100,000

        To Cash $40,000

        To Notes payable $60,000

(Being purchase of furniture and fixtures is recorded)

3. Inventory Dr, $200,000

         To accounts payable $200,000

(Being inventory on account is recorded)

4. Accounts receivable Dr, $280,000

  Cost of goods sold Dr, $140,000

          To Sales $280,000

          To Inventory $140,000

(Being credit sales is recorded)

5. Rent expenses Dr, $6,000

       To Cash $6,000

(Being rent paid is recorded)

6. Prepaid insurance Dr, $3,000

         To Cash $3,000

(Being insurance paid for one year is recorded)

7. Accounts payable Dr, $120,000

       To Cash $120,000

(Being purchase of goods is recorded)

8. Cash Dr, $55,000

      To Accounts receivable $55,000

(Being collection from customers on account is recorded)

9. Dividend Dr, $5,000

       To Cash $5,000

(Being cash dividend to shareholders is recorded)

10. Depreciation expense Dr, $2,000

       To Furniture and fixtures $2,000

(Being depreciation furniture and fixtures is recorded)

11. Insurance expense Dr, $250

          To Prepaid insurance $250

(Being insurance expense for the month is recorded)