Question

Selected transactions for Home Place, an interior decorator corporation, in its first month of business, are as follows.

Answer 1

Answer:

1. Issued stock to investors for $14,310 in cash.

Dr Cash (asset account) 14,310 ⇒ account increases

    Cr Common stock (equity account) 14,310 ⇒ account increases

2. Purchased used car for $10,330 cash for use in business.

Dr Vehicles (asset account) 10,330 ⇒ account increases

    Cr Cash (asset account) 10,330 ⇒ account increases

3. Purchased supplies on account for $310.

Dr Supplies (asset account) 310 ⇒ account increases

    Cr Accounts payable (liability account) 310 ⇒ account increases

4. Billed customers $4,880 for services performed.

Dr Accounts receivable (asset account) 4,880 ⇒ account increases

    Cr Service revenue (revenue account) 4,880 ⇒ account increases

5. Paid $180 cash for advertising start of the business.

Dr Advertising expense (expense account) 180 ⇒ account increases

    Cr Cash (asset account) 180 ⇒ account increases

6. Received $1,670 cash from customers billed in transaction (4).

Dr Cash (asset account) 1,670 ⇒ account increases

    Cr Accounts receivable (asset account) 1,670 ⇒ account increases

7. Paid creditor $160 cash on account.

Dr Accounts payable (liability account) 160 ⇒ account increases

    Cr Cash (asset account) 160 ⇒ account increases

8. Paid dividends of $550 cash to stockholders.

Dr Dividends (contra equity account) 550 ⇒ account increases, but total equity decreases

    Cr Cash (asset account) 550 ⇒ account increases

T-accounts listed below:

                 cash                                      

    debit              credit                          

1)   14,310

2)                        10,330

5)                        180

6) 1,670

7)                         160

8)                         550

    4,760

              vehicles                                        common stock

    debit              credit                           debit              credit  

2)  10,330                                          1)                          14,310

              supplies                                    accounts payable

    debit              credit                           debit              credit  

3)  310                                                3)                         310

                                                          7)   160                        

                                                                                      150

   accounts receivable                            service revenue

    debit              credit                           debit              credit  

4)  4,880                                            4)                         4,880

6)                         1,670

    3,210

   advertising expense                                  dividends

    debit              credit                           debit              credit  

5)  180                                                8)  550