Question

Griffin Service Company, Inc., was organized by Bennett Griffin and five other investors. The following activities occurred during the year:
a. Received $77,000 cash from the six investors; each investor was issued 9,100 shares of common stock with a par value of $0.10 per share.
b. Purchased equipment for use in the business at a cost of $25,000; one-fourth was paid in cash and the company signed a note for the balance (due in six months).
c. Signed an agreement with a cleaning service to pay $190 per week for cleaning the corporate offices next year.
d. Received an additional contribution from investors who provided $3,700 in cash and land valued at $22,000 in exchange for 1,700 shares of stock in the company.
e. Lent $3,200 to one of the investors, who signed a note due in six months.
f. Bennett Griffin borrowed $7,700 for personal use from a local bank, signing a one-year note.

Required:
For each transactions, record the effects of the transaction in the appropriate T-accounts.

Answer 1

Answer:

Griffin Service Company, Inc.

T-accounts:

Cash Account

Account Title                       Debit        Credit

Common Stock                 $5,460

Paid-in Capital In Excess $71,540

Equipment                                          $6,250

Paid-in Capital In Excess  $3,700

Notes Receivable                               $3,200

Common Stock

Account Title                       Debit        Credit

Cash                                                      $5,460

Land                                                            170

Paid-in Capital In Excess

Account Title                       Debit        Credit

Cash                                                  $71,540

Cash                                                   $3,700

Land                                                 $21,830

Equipment

Account Title                       Debit        Credit

Cash                                $6,250

Notes Payable               $18,750

Notes Payable

Account Title                       Debit        Credit

Equipment                                          $18,750

Notes Receivable

Account Title                       Debit        Credit

Cash                                  $3,200

Explanation:

Journal Entries:

a. Debit Cash Account $77,000

Credit Common Stock $5,460

Credit Paid-in Capital In Excess $71,540

To record the issue of 9,100 shares with a par value of $0.10 to each investor.

b. Debit Equipment $25,000

Credit Cash $6,250

Credit Notes Payable $18,750

To record the purchase of equipment with cash and note payable.

c. No journal entry required

d. Debit Cash $3,700

Debit Land $22,000

Credit Common Stock $170

Credit Paid-in Capital In Excess $25,530

To record the receipt of cash and land for 1,700 shares.

e. Debit Notes Receivable $3,200

Credit Cash Account $3,200

To record the lending of money to one of the investors.

f. No journal entry required.

Transactions c and f do not require journal entries.  Services for c will be received next year.  The transaction in f does not affect the company as a legal entity.