Question

Issued $25,000 of QCI stock for cash. Incurred $600 of utilities costs this month and will pay them next month. Incurred and paid wages for the current month, totaling $2,000. Performed cleaning services on account worth $2,800. Some of Quick Cleaners’s equipment was repaired at a total cost of $150. The company paid the full amount at the time the repair work was done. Required: Prepare journal entries for the above transactions, which occurred during a recent month. Determine QCI’s preliminary net income.

Answer 1

Answer:

A.

a.Dr Cash 25,000

Cr Common Stock 25,000

b. Dr Utilities expense 600

Cr Utilities payable 600

c. Dr Wages expense 2,000

Cr Cash 2,000

d. Dr Account receivable 2,800

Cr Service revenue 2,800

e. Dr Repairs expense 150

Cr Cash 150

B. $50

Explanation:

Preparation of Journal entries

a. Based on the information given we were told that the amount of $25,000 of QCI stock for cash was issued which means that the Journal entry will be :

Dr Cash 25,000

Cr Common Stock 25,000

b. Based on the information given we were told that they Incurred the amount of $600 of utilities costs which means that the Journal entry will be :

Dr Utilities expense 600

Cr Utilities payable 600

c. Based on the information given we were told that the company Incurred and as well paid wages totaling the amount of $2,000 which means that the Journal entry will be :

Dr Wages expense 2,000

Cr Cash 2,000

d. Based on the information given we were told that the company Performed cleaning services that cost $2,800 which means that the Journal entry will be:

Dr Account receivable 2,800

Cr Service revenue 2,800

e. Based on the information given we were told that the Cleaners’s equipment was repaired at the amount of $150 which means that the Journal entry will be :

Dr Repairs expense 150

Cr Cash 150

2) Calculation for the Net income

Net income = 2,800-2,000-150-600

Net income = $50

Therefore net income will be $50