Question

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

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.

Required:

Prepare in journal form, the entry to record each transaction.

Answer 1

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]