Question

Michael Field starts a catering business near a college campus. The company is named Homemade Cuisine. During the first month of operations, June 2018, the business completes severaltransactions as follows. Please record these transactions using journal entries:

a. Receives a $40,000 contribution from Michael Field and issues common stock to Michael Field (1 point)

b. Purchases $4,000 of kitchen equipment on account (1 point)

c. Pays cash of $9,000 for 3-month rent (June – July – August)(2 points)

d. Pays cash of $3,000 for food ingredients (1 point)

(Continued next page)

e. Serves customers and receives $11,000 in cash with the cost of $3,000 for food ingredients as in Transaction (d) (2 points)

f. Pays cash of $2,000 in salaries (1 point)

g. Pays $1,000 on the accounts payable the business created in Transaction (b) (1 point)

h. Pays cash of $1,000 for utilities (1 point)

Answer 1

Transaction	Account Titles and Explanation	Debit	Credit
a.	Cash	40000
	Common stock		40000
	(To record issuance of common stock)
b.	Kitchen equipment	4000
	Accounts payable		4000
	(To record kitchen equipment purchased on account)
c.	Prepaid rent	9000
	Cash		9000
	(To record rent paid for 3 months)
d.	Food ingredients inventory	3000
	Cash		3000
	(To record food ingredients purchased)
e.	Cash	11000
	Sales revenue		11000
	(To record cash sales)
	Cost of goods sold	3000
	Food ingredients inventory		3000
	(To record the cost of sales)
f.	Salaries expense	2000
	Cash		2000
	(To record salaries paid)
g.	Accounts payable	1000
	Cash		1000
	(To record payment on account)
h.	Utilities expense	1000
	Cash		1000
	(To record payment for utilities)

Note: For transaction c. the entire amount paid has been debited to prepaid rent in the absence of specific instructions. Rent expense for June is generally recorded at the time of adjusting entries which have not been asked for and hence not prepared. Please provide instructions in case the same is required. Thank you.