Question & Answer: Transactions should follow this format, as in this transaction on Dec. 31 – “the company paid cash dividends of $5,000”:…..

Question #1

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

cash                                                                                         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.