Question

Required: Make the necessary journal entries from the information given. Some dates do not require a journal entry. On dates that do not require an entry say “no entry required”. Omit the journal descriptions. Use the journal paper on the next page to make your journal entries.

2. Dominic Bueno started a delivery business as a sole proprietorship on 7/1/XX. During the month of July the company had the following transactions:

7/1 The owner invested $100,000 in cash into the business checking account. 7/1 Rented a garage with office space for $5,000 per month and paid the first month’s rent by check.

7/2 A new 2 ton delivery truck was purchased by the company. The total purchase price including taxes, license and fees was $115,000. The company paid $15,000 by check as a down payment and signed a long-term note for five years at an interest rate of 9% per year for the balance that was owed.

7/6 The company purchased a desktop computer and a printer for a total price of $1,150 and paid by check for the computer equipment.

7/8 Picked up and delivered machinery for a client. Billed $350 for the delivery service with terms “due on receipt”.

7/10 Received a bill for legal services in the amount of $1,200. 7/12 Entered into a $125,000 one year contract with a client to provide delivery services.

7/14 Received the amount owed from the 7/8 transaction.

7/15 Picked up and delivered furniture for a client and billed the client $565 with terms of “due on receipt”.

7/15 Wrote a check to Mr. Bueno for personal use in the amount of $2,000.

7/18 Purchased diesel fuel from a bulk fuel distributor on credit. The total amount owed for the fuel was $579 which the company will receive a bill for at the end of the month.

7/21 Delivered machinery under the terms of the contract signed on 7/12. The contract terms required that any amounts owed for delivery services will be billed for at the end of each month with terms of net 30 days.

7/31 Received the bill for the purchase of diesel fuel on 7/18 with terms of net 30 days.

7/31 Received a utility Bill in the amount of $475 and paid the bill immediately by check.

7/31 Billed the client for the delivery service provided on 7/21 in the amount of $2,100.

Answer 1

Journal Entries

Date	Particulars		Debit ($)	Credit ($)
7/1	Bank account	Dr	100000
	Capital account			100000
	(Being capital introduced into the business)
7/1	Office rent account	Dr	5000
	Bank account			5000
	(Being first month's rent paid. No entry for entering into the rent agreement)
7/2	Delivery truck account	Dr	115000
	Bank account			15000
	9% long term note account			100000
	(Being 2 ton truck purchased with $15000 down payment and acceptance of 9% long term note for the balance amount. Please note that at the end of the year there will be a journal entry to be passed for the interest falling due on the long term note.)
7/6	Computer equipment account	Dr	1150
	Bank account			1150
	(Being desktop and printer, which are classified under one account "computer equipment", purchased with a check)
7/8	Accounts receivable account	Dr	350
	Service revenue account			350
	(Being delivery service revenue recognised. "Due on receipt" means that as soon as the bill is received, the amount in the bill is due. Hence the above journal entry passed for increasing accounts receivable.)
7/10	Legal expense account	Dr	1200
	Accounts payable account			1200
	(Being legal expenses incurred)
7/12	No entry. There is no entry when a contract is entered into as no transaction occurs because of merely signing a contract.
7/14	Cash account	Dr	350
	Accounts receivable account			350
	(Being amount received from transaction on 7/8)
7/15	Accounts receivable account	Dr	565
	Service revenue account			565
	(Being delivery service revenue recognised. Refer to the explanation of transaction on 7/8. This transaction is the same as that on 7/8)
7/15	Capital account	Dr	2000
	Bank account			2000
	(Check written to Mr Bueno for person expenses is not a business transaction. The business money is used for personal purposes and hence amount to withdrawals from the business.)
7/18	Fuel expenses (diesel) account	Dr	579
	Accounts payable account			579
	(Being diesel purchased. When a purchase happens it has to be recorded then itself. The receipt of the bill is insignificant.)
7/21	Accounts receivable account	Dr	2100
	Contract revenue account			2100
	(Being contract revenue recognised. In this case the transaction of rendering a service and recognising the revenue therein, had to be recorded on the day of the transaction itself. Receipt of the bill on a later date is irrelevant)
7/31	no entry. Already recorded on 7/18
7/31	Utilities expense account	Dr	475
	To Bank account			475
	(Being utilities expense paid. This transaction has been recorded on the day of receipt of the bill because no information had been given regarding utilities expense incurred on an earlier date.)
7/31	no entry because it had already been recorded on 7/21