Question 2 25 pts (TCO 2) Prepare the following journal entries of David Company

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Question 2 25 pts (TCO 2) Prepare the following journal entries of David Company, a company who makes computers. March 1. Issued 1,000 shares of $ 1.00 par value common stock at $ 5.00 to shareholders March 4 Paid insurance for one year starting on March 1, 2017, and ending on February 28, 2018 in the amount of $ 50,000. March 8. Sold $20,000 of our computers. to a customer on account. March 10 Paid rent in advance for 1 year in the amount of $ 100,000. March 15. Collected cash from the March 8th transaction of $ 5,000. March 20: Purchased $ 20,000 in inventory from a vendor on account. Prepare the journal entries for the above transactions: (25 points) HTML Editor

Explanation / Answer

JOURNAL ENTRIES OF DAVID COMPANY

1. March 1 Bank A/c Dr $ 5000

To Equity share capital ( 1000 shares * $ 1 Par value) $ 1000

To securities Premium ( 1000 shares * $ 4 ) $ 4000

( Being shares issued to shareholders accounted for )

2. March 4 Insurance a/c Dr $ 50000

To Bank a/c $ 50000

( Being Insurance paid accounted )

3. March 8 Account receivable a/c Dr $ 20000

To Sales $ 20000

( Being entry for sale of computers accounted)

4. March 10 Rent advance a/c Dr $ 100000

To Bank $ 100000

( Being advance rent paid accounted )

5. March 15 Cash a/c Dr $ 5000

To Account receivable $ 5000 ( Being cash received for sale of computer on March 8 accounted)

6. March 20 Purchases a/c Dr $ 20000

To Account Payable $ 20000

( Being Purchase of inventory on credit accounted)

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