Preston Auto Paint Company had the temporary free use of an old building and completed the following transactions in September 2010:
Sept. 1 The company was organized and received USD 100,000 cash from the issuance of capital stock.
5 The company bought painting and sanding equipment for cash at a cost of USD 25,000.
7 The company painted the auto fleet of a customer who agreed to pay USD 8,000 in one week. The customer furnished the special paint.
14 The company received the USD 8,000 from the transaction of September 7.
20 Additional sanding equipment that cost USD 2,800 was acquired today; payment was postponed until September 28.
28 USD 2,400 was paid on the liability incurred on September 20.
30 Employee salaries for the month, USD 2,200, were paid.
30 Placed an order for additional painting equipment advertised at USD 20,000.
Prepare a summary of transactions for the company for these transactions. Use money columns headed Cash, Accounts Receivable, Equipment, Accounts Payable, Capital Stock, and Retained Earnings.
Determine balances after each transaction to show that the basic accounting equation balances.
2. Prepare journal entries to record each of the following transactions for Sanchez Company. Use the letter of the transaction in place of the date. Include an explanation for each entry.
a. Capital stock was issued for cash, USD 300,000.
b. Purchased trucks by signing a note bearing no interest, USD 210,000.
c. Earned service revenue on account, USD 4,800.
d. Collected the account receivable resulting from transaction (c), USD 4,800.
e. Paid the note payable for the trucks purchased, USD 210,000.
f. Paid utilities for the month in the amount of USD 1,800.
g. Paid salaries for the month in the amount of USD 7,500.
h. Incurred supplies expenses on account in the amount of USD 1,920.
i. Purchased another truck for cash, USD 48,000.
j. Performed delivery services on account, USD 24,000.