Question

Prepare journal entries to record each of the following transactions. Determine the effect of each transaction on net income and cash flows.

Issued common stock for $250,000.

Purchased land for $100,000 in cash.

Purchased $11,000 of supplies on account.

Rendered $10,000 services to clients and received immediate payment.

Paid $900 on accounts payable.

Rendered $25,000 of services to clients on account.

Paid $2,000 in dividends.

Received $3,000 cash in exchange for services to be rendered in 3 months.

Received $500 cash on a customer’s account.

Used up supplies of $1,000 during the accounting period.

Received property tax bill for $3,000 payable in 60 days.

Answer 1

Accounts Title & Explanation	Debit	Credit	Effect on net income	Effect on cash flows
Cash	$250000		No Effect	Inflow of cash (Financing)
Common Stock		$250000
Land	$100000		No effect	Outflow of cash (Financing)
Cash		$100000
Supplies	$11000		No effect	Infow of cash (Operating)
Accounts Payable		$11000
Cash	$10000		Increase	Infow of cash (Operating)
Service Revenue		$10000
Accounts Payable	$900		No effect	Outflow of cash (Operating)
Cash		$900
Accounts Receivable	$25000		Increase	Outflow of cash (Operating)
Service Revenue		$25000
Dividends	$2000		No effect	Outflow of cash (Financing)
Cash		$2000
Cash	$3000		No effect	Infow of cash (Operating)
Unearned Service Revenue		$3000
Cash	$500		No effect	Infow of cash (Operating)
Accounts Receivable		$500
Supplies Expense	$1000		Decrease	No effect
Supplies		$1000
Property tax expenses	$3000		Decrease	Infow of cash (Operating)
Property tax payable		$3000