Answer:
Stridewell Corporation
Journal Entries:
Debit Cash Account $625,000
Credit Common Stock $625,000
To record the issue of 125,000 shares for cash.
Debit Office Equipment $102,500
Credit Cash Account $41,000
Credit Note Payable $61,500
To record the purchase of office equipment.
Debit Inventory $250,000
Credit Accounts Payable $250,000
To record the purchase of inventory.
Debit Accounts Receivable $425,000
Credit Sales Revenue $425,000
To record the sale of goods on account.
Debit Cost of Goods Sold $212,500
Credit Inventory $212,500
To record the cost of goods sold.
Debit Rent Expense $5,500
Credit Cash Account $5,500
To record the payment of rent for the month.
Debit Prepaid Insurance $2,880
Credit Cash Account $2,880
To record the payment for insurance for a year.
Debit Accounts Payable $180,625
Credit Cash Account $180,625
To record the payment to suppliers on account.
Debit Cash Account $85,000
Credit Accounts Receivable $85,000
To record the receipt of cash from customers.
Debit Dividend $6,250
Credit Cash Account $6,250
To record the payment of cash dividend.
Debit Depreciation Expense - Office Equipment $2,050
Credit Accumulated Depreciation - Office Equipment $2,050
To record depreciation expense for the month.
Debit Insurance Expense $240
Credit Prepaid Insurance $240
To record insurance expense for the month.
Explanation:
Stridewell's insurance expense that expired for the month is obtained by dividing the Prepaid Insurance by 12 since it is for one year. Thus, Stridewell obtains $240 ($2,880/12) as the expense for the month. The balance remaining in the Prepaid Insurance is a current asset which is carried into the next month.
Journal entries help us to identify the accounts involved in each Stridewell's transaction and the account it should debit and the one it should credit. They are the initial record made by Stridewell in its accounting books for each business transaction.
