Transactions should follow this format, as in this transaction on Dec. 31 – “the company paid cash dividends of $5,000”:
Date Description DR CR
12/31 owner’s equity (dividends) 5,000
Record the following transactions then construct the income statement, statement of owner’s equity and balance sheet.
On January 3 a company began business by issuing owner’s equity for $500,000 cash.
On Jan. 10 the company bought equipment of $400,000 using a 10-yr., 5% notes payable.
On Jan. 14 the company purchased merchandise inventory for $100,000 cash.
During the year the company had cash sales of $300,000.
During the year cost of goods sold were $75,000.
During the year operating expenses $100,000.
On Dec. 31 the company paid the interest expense in cash.
On Dec. 31 the company paid the income tax expense of $25,000 in cash.
On Dec. 31 the company paid cash dividends of $5,000.