Journal Entry
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The following are the transactions relating to the formation of Cardinal Mowing Services, Inc. and its first month of operations. Write journal entry(ies) for the following transactions:
a) The firm was organized and owners invested cash of $600
b) The company borrowed $900 from a relative of the owners, a short-term note was signed.
c) Two lawn movers costing $480 each and a trimmer costing $130 were purchased for cash. The original price of each mover was $610, but a discount was received but a discount was received because the seller was having a sale.
d) Gasoline, oil, and several packages of trash bags were purchased for cash of $90.
e) Advertising flyers announcing the formation of the business and a newspaper ad were purchased. The cost of these items, $170, will be paid in 30 days.
f) During the first two weeks of operations, 47 lawns were moved. The total revenue for this work was $705; $465 was collected in cash and the balance will be received within30 days.
g) Employees were paid $420 for their work during the first two weeks.
h) Additional gasoline, oil, and trash bags costing $110 were purchased for cash.
i) In the last two weeks of the first month, revenues totaled $920, of which $375 was collected.
j) Employee wages for the last two weeks totaled $510; these will be paid during the first week of next month.
k) It was determined that at the end of the month the cost of gasoline, oil, and trash bags still on hand was $30.
l) Customers paid a total of $150 due from moving services provided in the first two weeks. The revenue for these services was recognized in transaction f .
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Solution Summary
The solution explains the journal entries to be made for the given transactions
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a) The firm was organized and owners invested cash of $600
The cash will increase and the owners equity will increase. The entry is
Cash Dr 600
Owners Equity Cr 600
b) The company borrowed $900 from a relative of the owners, a short-term note was signed.
This is a borrowing, cash will increase and the borrowing in the form of notes payable will increase
Cash Dr 900
Notes Payable Cr 900
c) Two lawn movers costing $480 each and a trimmer costing $130 were purchased for cash. The original price of each mover was $610, but a discount was received but a discount was received because the seller was having a sale.
The cost of the asset is the cash paid and not the original price. The total purchase of the equipments is 480X2+130=$1,090. This we ...
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