Question

The following events occurred for Favata Company: Received $12,000 cash from owners and issued stock to them. Borrowed $9,000 cash from a bank and signed a note due later this year. Bought and received $1,000 of equipment on account. Purchased land for $16,000; paid $1,400 in cash and signed a long-term note for $14,600. Purchased $5,000 of equipment; paid $1,400 in cash and charged the rest on account. Required: For each of the events in above, prepare journal entries. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)

Answer 1

Answer:

The journal entries is as follows:

(1) Received $12,000 cash from owners and issued stock to them

Cash A/C   Dr.  $12,000

To Stock capital a/c           $12,000

(2) Borrowed $9,000 cash from a bank and signed a note due later this year.

Cash a/c   Dr. $9,000

To Notes Payable(short term)         $9,000

(3) Bought and received $1,000 of equipment on account.

Equipment a/c   Dr. $1,000

To Vendor's a/c                    $1,000

(4) Purchased land for $16,000; paid $1,400 in cash and signed a long-term note for $14,600.

Land a/c     Dr.    $16,000

To cash a/c                            $1,400

To Note payable(long term)  $14,600

(5) Purchased $5,000 of equipment; paid $1,400 in cash and charged the rest on account.

Equipment a/c   Dr. $5,000

To cash a/c                            $1,400

To Vendor's a/c                    $3,600