Question

The following transactions occur for Cardinal Music Academy during the month of October: Provide music lessons to students for $17,000 cash. Purchase prepaid insurance to protect musical equipment over the next year for $4,200 cash. Purchase musical equipment for $20,000 cash. Obtain a loan from a bank by signing a note for $30,000.Record the transactions. The company uses the following accounts: Cash, Prepaid Insurance, Equipment, Notes Payable, and Service Revenue.

Answer 1

Answer:

See explanation section

Explanation:

1. Debit     Cash                   $17,000

Credit            Service revenue (music)       $17,000

Note: The academy receives cash by providing music services to the students.

2. Debit     Prepaid Insurance          $4,200

Credit                    Cash                                 $4,200

Note: The academy paid cash in advance to purchase insurance policy.

3. Debit    Musical Equipment           $20,000

Credit                     Cash                                    $20,000

Note: The academy paid cash for acquiring musical equipment.

4. Debit     Cash                              $30,000

Credit             Notes payable                           $30,000

Note: The academy borrowed cash by signing a notes from the bank.