value 5.00 points Ryan Terlecki organized a new Internet company, CapUniverse, I
ID: 2569004 • Letter: V
Question
value 5.00 points Ryan Terlecki organized a new Internet company, CapUniverse, Inc. The company specializes in baseball-type caps with logos printed on them. Ryan, who is never without a cap, believes that his target market is college and high school students. You have been hired to record the transactions occurring in the first two weeks of operations a. Issued 2,500 shares of $0.01 par value common stock to investors for cash at $25 per share b. Borrowed $62,000 from the bank to provide additional funding to begin operations; the note is due in two years c. Paid 1,000 for the current month's rent of a warehouse and another $1,000 for next month's rent. d. Paid $1,440 for a one-year fire insurance policy on the warehouse (recorded as a prepaid expense) e. Purchased furniture and fixtures for the warehouse for $18,000, paying $3,700 cash and the rest on account. The amount is due within 30 days f. Purchased for $3,800 cash The University of Pennsylvania, Notre Dame, The University of Texas at Austin, and Michigan State University baseball caps as inventory to sell online g. Placed advertisements on Google for a total of S350 cash h. Sold caps totaling $2,200, half of which was charged on account. The cost of the caps sold was $1,400. (Hint: Make two entries.) i. Made full payment for the furniture and fixtures purchased on account in (e) j. Received $280 from a customer on account. Required Prepare journal entries for each transaction. Note that transaction (h) will require two entries, one for revenue and one for the related expense. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) View transaction list Journal entry worksheet 2 3 4 7 8 Record issue of 2,500 shares of $.01 par value common stock to investors for cash at $25 per share Note: Enter debits before credits. Transaction General Journal Debit Credit Record entry Clear entry View general journalExplanation / Answer
Journal Entry
Date
Particulars
Dr. Amount (In $)
Cr. Amount (In $)
A
Cash
TO Common Stock
TO Additional Paid-in Capital Common Stock
62,500
25
62,475
B
Cash
TO Loan from Bank
62,000
62,000
C
Rent Expense
Prepaid Rent
TO Cash
1,000
1,000
1,000
D
Prepaid Expense
TO Cash
(See Note 1)
1,440
1,440
E
Furniture & Fixtures
TO Cash
TO Accounts Payable
18,000
3,700
14,300
F
Purchase
TO Cash
3,800
3,800
G
Advertisement Expense
TO Cash
350
350
H a.
Accounts Receivable
TO Sales Revenue
2,200
2,200
H b.
Cost of goods sold
TO Purchases (See Note 2)
1,400
1,400
I
Accounts Payable
TO Cash
14,300
14,300
J
Cash
TO Accounts Receivable
280
280
Note 1: In prepaid expense, we have assumed that insurance expense for the current month will be debited on the last day of month and therefore whole amount is first charged to Prepaid expense account and the same will be proportionately charge to Expense account at each month end.
Moreover, there can be one more view to the statement that prepaid expense was recorded earlier in the books and now expense is requried to be booked. Please check the same with your answer
Note 2: Cost of caps sold is $1,400 so we have debited the cost of goods sold and credited the inventory purchased in the current month. We have assumed that there is no opening inventory in the beginning of the month.
Date
Particulars
Dr. Amount (In $)
Cr. Amount (In $)
A
Cash
TO Common Stock
TO Additional Paid-in Capital Common Stock
62,500
25
62,475
B
Cash
TO Loan from Bank
62,000
62,000
C
Rent Expense
Prepaid Rent
TO Cash
1,000
1,000
1,000
D
Prepaid Expense
TO Cash
(See Note 1)
1,440
1,440
E
Furniture & Fixtures
TO Cash
TO Accounts Payable
18,000
3,700
14,300
F
Purchase
TO Cash
3,800
3,800
G
Advertisement Expense
TO Cash
350
350
H a.
Accounts Receivable
TO Sales Revenue
2,200
2,200
H b.
Cost of goods sold
TO Purchases (See Note 2)
1,400
1,400
I
Accounts Payable
TO Cash
14,300
14,300
J
Cash
TO Accounts Receivable
280
280
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