Question

Prepare journal entries to record the following transactions of Sport Shoes Company

1. Started business by issuing 10,000 ordinary shares for OR50,000.
2. Purchased equipment for OR 5,400, paying OR 1,000 cash and signing a note payable for the balance.
3. Purchased OR 3,800 of supplies on account.
4. Recorded credit sales of OR 8000 for the first week.
5. Paid for supplies purchased in item (3).
6. Paid an insurance company OR 4,800. For a one-year insurance policy
7. Collected OR 4,500 on account from customers .
8. paid employees OR 3,000 wages

Answer 1

Journal entries:

Date	Accounts	Debit	Credit
1.	Cash ac	OR 50,000
	To Common stock		OR 50,000
2.	Equipment ac	OR 5,400
	To Cash		OR 1,000
	To Notes payable		OR 4,400
3.	Supplies ac	OR 3,800
	To Accounts payable		OR 3,800
4.	Accounts receivable	OR 8,000
	To Sales revenue		OR 8,000
5.	Accounts payable	OR 3,800
	To Cash		OR 3,800
6.	Prepaid insurance	OR 4,800
	To Cash		OR 4,800
7.	Cash	OR 4,500
	To Accounts receivable		OR 4,500
8.	Wages	OR 3,000
	To Cash		OR 3,000

SUMMARY:

10,000 shares of ordinary shares are issued for OR 50,000. Here assuming that whole amount is transferred to common stock account as there is no par value of share given. Supplies on account is entered as debiting supplies assuming that it is not yet consumed.