Castle Consulting Agency began business in February. The transactions entered in

Question

Castle Consulting Agency began business in February. The transactions entered into by Castle during its first month of operations are as follows:

Required:

a. Acquired articles of incorporation from the state and issued 20,000 shares of capital stock in exchange for $300,000 in cash. b. Paid monthly rent of $700. c. Signed a five-year promissory note for $100,000 at the bank. d. Purchased software to be used on future jobs. The software costs $850 and is expected to be used on five to eight jobs over the next two years. e. Billed customers $13,000 for work performed during the month. f. Paid office personnel $4,000 for the month of February. g. Received a utility bill of $200. The total amount is due in 30 days.

Explanation / Answer

Ref Account Debit Credit a Cash $ 3,00,000.00 To Equity share capital $ 3,00,000.00 [Being share capital issued for cash] b Rent expense $          700.00 To cash $          700.00 [Paid monthly rental expense] c Cash $ 1,00,000.00 To Note payable $ 1,00,000.00 [Being note payable signed] d Software $          850.00 To Cash $          850.00 [Being software purchased] e Accounts receivable $     13,000.00 To Sales revenue $     13,000.00 [Being bills raised on customers] f Salary expense $       4,000.00 To cash $       4,000.00 [Being salaries paid] g Utility expense $          200.00 To utility payable $          200.00 [Being utility bill received]

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