Journal Entries
Marco Publishing is incorporated on March 1, 2021, and enters into the following transactions
during its first month of operations.
1. Received contributions of $10,000 from each of the two owners in the business in
exchange for common stock.
2. Purchased $400 of office supplies on credit.
3. Purchased office equipment for $7,500, paying $2,500 in cash and signed a 30-day
$5000, note payable
4. Billed clients $5,000 for publishing services performed.
5. Paid $700 in cash for the current month’s rent.
6. Paid $200 cash on account for office supplies purchased in transaction 2.
7. Received a bill of $500 for advertising for the current month.
8. Paid $2,200 cash for office salaries.
9. Paid $1,200 cash dividends to stockholders.
10. Received a check for $4,000 from a client in payment on account for publishing fees
billed in transaction 4.
11. Supplies on hand at the end of March amounted to $50.
Required:
A. Prepare the appropriate journal entries for the above transactions.
B. Determine total assets, liabilities, and stockholder’s equity at the end of March.
Solution:
A. 1. Cash
20,000
Common Stock
20,000
2. Supplies
400
Accounts Payable
400
3. Equipment
7,500
Cash
2,500
Note Payable (S-T) 5,000
4. Account Receivable
Revenue
7. Advertising Expense
Account Payable
500
500
8. Salary Expense
Cash
2,200
9. Dividend
Cash
1,200
1,200
2,200
10. Cash
4,000
Accounts Rec.
4,000
5,000
5,000
5. Rent Expense
Cash
700
6. Accounts Payable
Cash
200
11. Supply Expense
Supplies
350
350
700
200
Total Assets = Cash (17,200) + Acct. Rec (1,000) + Supplies (50) + Equip. (7,500) = $25,750
Total Liabilities = Acct. Pay (700) + Note Pay (5,000) = $5,700
Total SHE = Common Stock (20,000) + Net Income (1,250) – Dividend (1,200) = $20,050
Net Income: Revenue (5,000) – Rent Exp. (700) – Salary Exp. (2,200) – Advertising Exp (500) Supply Exp. (350) = 1,250