Q17E - Intermediate Accounting (Kieso)

Question

E3-17 (L02) (Transactions of a Corporation, Including Investment and Dividend) Scratch Miniature Golf and DrivingRange Inc. was opened on March 1 by Scott Verplank. The following selected events and transactions occurred during March.Mar. 1 Invested \(50,000 cash in the business in exchange for common stock.3 Purchased Michelle Wie’s Golf Land for \)38,000 cash. The price consists of land \(10,000, building \)22,000, and equipment\(6,000. (Make one compound entry.)5 Advertised the opening of the driving range and miniature golf course, paying advertising expenses of \)1,600.6 Paid cash \(1,480 for a one-year insurance policy.10 Purchased golf equipment for \)2,500 from Singh Company, payable in 30 days.18 Received golf fees of \(1,200 in cash.25 Declared and paid a \)500 cash dividend.30 Paid wages of \(900.30 Paid Singh Company in full.31 Received \)750 of fees in cash.Scratch uses the following accounts: Cash, Prepaid Insurance, Land, Buildings, Equipment, Accounts Payable, Common Stock,Dividends, Service Revenue, Advertising Expense, and Salaries and Wages Expense.InstructionsJournalize the March transactions. (Provide explanations for the journal entries.)

Step-by-Step Solution

Answer

The journal entries for March are shown in step 2.

Step 1: Meaning of Journal Entry

The journal entries are the first step in the preparation of financial statements. A journal entry can be defined as the act of making the records of the transactions of the business in chronological order. 

Step 2: Preparation of journal entries

Scratch Miniature Golf and Driving  Range Inc.
Journal entries
Date	Account and explanation	Debit $	Credit $
March 1	Cash	50000
	Common stock		50000
	( To issuance of common stock is recorded)
March 3	Land	10000
	Building	22000
	Equipment	6000
	Cash		38000
	( To the purchase of fixed assets is recorded)
March 5	Advertising expense	1600
	Cash		1600
	( Toadvertisementexpenses is recorded)
March 6	Prepaid insurance	1480
	Cash		1480
	( To prepaid insurance is recorded)
March 10	Equipment	2500
	Accounts payable		2500
	( To purchase of equipment is recorded)
March 18	Cash	1200
	Service revenue		1200
	(To service revenue is received)
March 25	Dividends	500
	Cash		500
	( To cash dividend paid is recorded)
March 30	Salaries and Wages expenses	900
	Cash		900
	( To wages paid is recorded)
March 30	Accounts payable	2500
	Cash		2500
	( To accounts payable toSinghh company is recorded)
March 31	Cash	750
	Service revenie		750
	( To service revenue is recored)