Question

P3-2 (Algo) Recording Journal Entries LO3-4

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 month of operations.

1. Issued 3,000 shares of $0.01 par value common stock to investors for cash at $30 per share.

2. Borrowed $66,000 from the bank to provide additional funding to begin operations; the note is due in two years.

3. Paid $2,400 cash for rent of a warehouse: $1,200 for the current month’s rent and another $1,200 for next month’s rent.

4. Paid $2,280 for a one-year fire insurance policy on the warehouse (recorded as a prepaid expense).

5. Purchased furniture and fixtures for the warehouse for $11,000, paying $2,700 cash and the rest on account. The amount is due within 30 days.

6. Purchased for $3,300 cash The University of Pennsylvania, Notre Dame, The University of Texas at Austin, The Ohio State University, and Michigan State University baseball caps as inventory to sell online.

7. Placed advertisements on Google for a total of $310 cash; the ads were run immediately.

8. Sold caps totaling $2,000, half of which was charged on account. The cost of the caps sold was $1,200. (Hint: Make two entries.)

9. Made full payment for the furniture and fixtures purchased on account in (e).

10. Received $240 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.)

Answer 1

​​​​​​Journal entries:

a.	Cash (+A)......................................................................................	90,000
	Contributed capital (+SE)........................................................		90,000
b.	Cash (+A)......................................................................................	66,000
	Note payable (long-term) (+L).................................................		66,000
c.	Rent expense (+E, -SE)................................................................	1,200
	Prepaid rent (+A)...........................................................................	1,200
	Cash (-A)................................................................................		2,400
d.	Prepaid insurance (+A)..................................................................	2,280
	Cash (-A) ...............................................................................		2,280
e.	Equipment (+A).............................................................................	11,000
	Accounts payable (+L) ...........................................................		8,300
	Cash (-A) ...............................................................................		2,700
f.	Inventory (+A)...............................................................................	3,300
	Cash (-A) ...............................................................................		3,300
g.	Advertising expense (+E, -SE).....................................................	310
	Cash (-A) ...............................................................................		310
h.	Cash (+A)......................................................................................	1000
	Accounts receivable (+A)..............................................................	1000
	Sales revenue (+R, +SE) .........................................................		2,000
	Cost of goods sold (+E, -SE).......................................................	1,200
	Inventory (-A) ........................................................................		1,200
i.	Accounts payable (-L)..................................................................	8,300
	Cash (-A) ...............................................................................		8,300
j.	Cash (+A)......................................................................................	240
	Accounts receivable (-A) .......................................................		240