Question

The following transactions occurred at the Daisy King Ice Cream Company.

1. Started business by issuing 10,000 shares of common stock for $37,000.
2. Signed a franchise agreement to pay royalties of 5% of sales.
3. Leased a building for three years at $670 per month and paid six months' rent in advance.
4. Purchased equipment for $7,100, paying $4,000 down and signing a two-year, 8% note for the balance.
5. Purchased $3,500 of supplies on account.
6. Recorded cash sales of $2,500 for the first week.
7. Paid weekly salaries and wages, $1,170.
8. Paid for supplies purchased in item (5).
9. Paid royalties due on first week's sales.
10. Recorded depreciation on equipment, $100.

Required:
Prepare journal entries to record each of the transactions listed above.

• 1

  Started business by issuing 10,000 shares of common stock for $37,000.

• 2

  Signed a franchise agreement to pay royalties of 5% of sales.

• 3

  Leased a building for three years at $670 per month and paid six months' rent in advance.

• 4

  Purchased equipment for $7,100, paying $4,000 down and signing a two-year, 8% note for the balance.

• 5

  Purchased $3,500 of supplies on account.

• 6

  Recorded cash sales of $2,500 for the first week.

• 7

  Paid weekly salaries and wages, $1,170.

• 8

  Paid for supplies purchased in item (5).

• 9

  Paid royalties due on first week's sales.

• 10

  Recorded depreciation on equipment, $100.

Answer 1

	Account	Debit	Credit
1	Cash	$       37,000
	Common stock		$       37,000
2	No entry
3	Prepaid rent	$          4,020
	Cash		$          4,020
4	Equipment	$          7,100
	Cash		$          4,000
	Note payable		$          3,100
5	Supplies	$          3,500
	Accounts payable		$          3,500
6	Cash	$          2,500
	Sales		$          2,500
7	Salaries and wages expense	$          1,170
	Cash		$          1,170
8	Accounts payable	$          3,500
	Cash		$          3,500
9	Royalty expense	$             125
	Cash		$             125
10	Depreciation expense	$             100
	Accumulated depreciation		$             100