Question

E3-15 (Algo) Analyzing the Effects of Transactions in T-Accounts LO3-4

Lisa Frees and Amelia Ellinger have been operating a catering business for several years. In March, the partners plan to expand by opening a retail sales shop. They have decided to form the business as a corporation called Traveling Gourmet, Inc. The following transactions occurred in March:

1. Received $100,000 cash from each of the two shareholders to form the corporation, in addition to $4,000 in accounts receivable, $9,300 in equipment, a van (equipment) appraised at a fair value of $17,000, and $2,200 in supplies. Gave the two owners each 900 shares of common stock with a par value of $1 per share.
2. Purchased a vacant store for sale in a good location for $560,000, making a $112,000 cash down payment and signing a 10-year mortgage note from a local bank for the rest.
3. Borrowed $70,000 from the local bank on a 10 percent, one-year note.
4. Purchased food and paper supplies costing $14,200 in March; paid cash.
5. Catered four parties in March for $6,200; $2,000 was billed and the rest was received in cash.
6. Sold food at the retail store for $17,900 cash; the food and paper supplies used cost $11,230. (Hint: Record the revenue effect separate from the expense effect.)
7. Received a $620 telephone bill for March to be paid in April.
8. Paid $563 in gas for the van in March.
9. Paid $10,280 in wages to employees who worked in March.
10. Paid a $500 dividend from the corporation to each owner.
11. Purchased $70,000 of equipment (refrigerated display cases, cabinets, tables, and chairs) and renovated and decorated the new store for $30,000 (added to the cost of the building); paid cash.

Required:

2. Record in the T-accounts the effects of each transaction for Traveling Gourmet, Inc., in March.

Answer 1