The following transactions occurred at the Daisy King Ice Cream Company 1. Start
ID: 2397359 • Letter: T
Question
The following transactions occurred at the Daisy King Ice Cream Company 1. Started business by issuing 10,000 shares of common stock for $21,000. 2. Signed a franchise agreement to pay royalties of 6% of sales. 3. Leased a building for three years at $510 per month and paid six months' rent in advance 4. Purchased equipment for $5,500, paying $2,000 down and signing a two-year, 12% note for the balance. 5. Purchased $1,900 of supplies on account. 6. Recorded cash sales of $900 for the first week. 7. Pald weekly salarles and wages, $370. 8. Paid for supplies purchased in item (5) 9. Paid royaltles due on first week's sales. 10. Recorded depreclation on equipment, $60. Required: Prepare journal entries to record each of the transactions listed above. (If no entry is required for a transaction/event, select "No journal entry requlred" in the first account fleld.)Explanation / Answer
Daisy King Ice Cream company
Journal entries
Transaction No
General Journal
Debit
Credit
1
Cash
$ 21,000.00
Common Stock
$ 21,000.00
(Business Started)
2
No Journal Entry
3
Advance Rent
$ 3,060.00
Cash
$ 3,060.00
(Advance Rent Paid)
4
Equipment
$ 5,500.00
Cash
$ 2,000.00
Notes Payable
$ 3,500.00
(Equipment purchased)
5
Supplies
$ 1,900.00
Accounts Payable
$ 1,900.00
(Supplies purchased on Account)
6a
Cash
$ 900.00
Sales Revenue
$ 900.00
(cash sales recorded)
6b
Royalty Expense
$ 54.00
Royalty Payable
$ 54.00
(royalties Payable)
7
Salaries and wages Expense
$ 370.00
Cash
$ 370.00
(Salaries and wages paid for week ended)
8
Accounts Payable
$ 1,900.00
Cash
$ 1,900.00
(Cash paid for Supplies purchased earlier on account)
9
Royalty Payable
$ 54.00
Cash
$ 54.00
(Royalty Paid)
10
Depreciation Expense- Equipment
$ 60.00
Accumulated depreciation - Equipment
$ 60.00
(Depreciation on Equipment recorded)
Note- Royalty is payable when sales revenue is earned. Royalty expense is booked when sales revenue is recorded and then payment of royalty is done by royalty payable account. Alternatively royalty can be directly paid through royalty expense as shown below.
Alternative solution for entry Number 9
9
Royalty Expense
$ 54.00
Cash
$ 54.00
(Royalty Paid)
Daisy King Ice Cream company
Journal entries
Transaction No
General Journal
Debit
Credit
1
Cash
$ 21,000.00
Common Stock
$ 21,000.00
(Business Started)
2
No Journal Entry
3
Advance Rent
$ 3,060.00
Cash
$ 3,060.00
(Advance Rent Paid)
4
Equipment
$ 5,500.00
Cash
$ 2,000.00
Notes Payable
$ 3,500.00
(Equipment purchased)
5
Supplies
$ 1,900.00
Accounts Payable
$ 1,900.00
(Supplies purchased on Account)
6a
Cash
$ 900.00
Sales Revenue
$ 900.00
(cash sales recorded)
6b
Royalty Expense
$ 54.00
Royalty Payable
$ 54.00
(royalties Payable)
7
Salaries and wages Expense
$ 370.00
Cash
$ 370.00
(Salaries and wages paid for week ended)
8
Accounts Payable
$ 1,900.00
Cash
$ 1,900.00
(Cash paid for Supplies purchased earlier on account)
9
Royalty Payable
$ 54.00
Cash
$ 54.00
(Royalty Paid)
10
Depreciation Expense- Equipment
$ 60.00
Accumulated depreciation - Equipment
$ 60.00
(Depreciation on Equipment recorded)
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