Question

Economy Laundry Company had the following transactions in August:

Aug. 1 Issued capital stock for cash, $ 150,000.

3 Borrowed $ 40,000 from the bank on a note.

4 Purchased cleaning equipment for $ 25,000 cash.

6 Performed services for customers who promised to pay later, $ 16,000.

7 Paid this month’s rent on a building, $ 2,800.

10 Collections were made for the services performed on August 6, $ 3,200.

14 Supplies were purchased on account for use this month, $ 3,000.

17 A bill for $ 400 was received for utilities for this month.

25 Laundry services were performed for customers who paid immediately, $ 22,000.

31 Paid cash dividend, $ 2,000.

Required:

Prepare journal entries for these transactions.

Answer 1

Solution:

Date	General Ledger	Debit	Credit
Aug. 1	Cash A/c	$1,50,000
	Capital Stock		$1,50,000
Aug. 3	Cash	$40,000
	Notes Payable		$40,000
Aug. 4	Equipment	$25,000
	Cash		$25,000
Aug. 6	Accounts Receiveble	$16,000
	Service Revenue		$16,000
Aug. 7	Rent Expenses	$2,800
	Cash		$2,800
Aug. 10	Cash	$3,200
	Accounts Receiveble		$3,200
Aug. 14	Supplies expenses	$3,000
	Accounts Payable		$3,000
Aug. 17	Utilities Expenses	$400
	Accounts Payable		$400
Aug. 25	Cash	$22,000
	Service Revenue		$22,000
Aug. 31	Retained Earnings	$2,000
	Dividend Payable		$2,000
Aug. 31	Dividend Payable	$2,000
	Cash		$2,000