Question

CP 2–2



Required: Prepare journal entries for each of the following transactions: 1. Issued common stock for $3,000 cash 2. Purchased $2,000 of equipment on credit 3. Paid $400 cash for this month’s rent 4. Purchased on credit $4,000 of supplies to be used next month 5. Billed $2,500 to customers for repairs made to date 6. Paid cash for one‐half of the amount owing in transaction 4 7. Collected $500 of the amount billed in transaction 5 8. Sold one‐half of the equipment purchased in transaction 2 above for $1,000 in cash.

Answer 1

S. No.	Accounting Description	Debit ( in $)	Credit ( in $)
1	Cash A/c Dr.	1000
	To Share Capital A/c		1000
	( Being Share Capital Issued)
2	Equipment A/c Dr.	2000
	To Account Creditors A/c		2000
	( Being Equipment purchased on Credit)
3	Rent Expenses A/c Dr.	400
	To Cash A/c		400
	( Being Rent expenses Paid for the mOnth )
4	Supplies A/c Dr.	4000
	To Account Creditors A/c		4000
	( Being Supplies purchased on Credit)
5	Account Debtors A/c Dr.	2500
	To Revenue - Repair A/c		2500
	( Being Repair Services offerred on credit)
6	Account Creditors A/c	2000
	To Cash A/c Dr.		2000
	( Being Supplies mpayment made)
7	Cash A/c Dr.	500
	To Account Debtors A/c		500
	( Being Amount Collected)
8	Cash A/c Dr.	1000
	To Equipment A/c		1000
	( Being equipment Sold)
Explanation	Equipment - Held for Sale A/c Dr.	1000
	To Equipment A/c		1000
	( Being Equipment Classified as Held for Sale)
	Explnation for 8.
	Explanation: For One Half of Equipment, if it will make the equioment useless for repair services. Hence the other part is determined as discarded and remarked as held for sale. No Depreciation shall be charged on the same.