Question

E2-6 Recording Investing and Financing Activities LO2-4

The following events occurred for Johnson Company:

1. Received investment of cash by organizers and distributed to them 1,140 shares of $1 par value common stock with a market price of $10 per share.
2. Purchased $8,600 of equipment, paying $1,000 in cash and owing the rest on accounts payable to the manufacturer.
3. Borrowed $7,000 cash from a bank.
4. Loaned $600 to an employee who signed a note.
5. Purchased $20,000 of land; paid $4,000 in cash and signed a mortgage note for the balance.

Required:

Prepare journal entries for the above transactions. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Answer 1

Johnson Company

Journal Entries    (Amounts in $)

No.	Account Titles	Debit	Credit
1)	Cash (1,140*$10 per share)	11,400
	Common Stock (1,140 shares*$1 par)		1,140
	Paid-in Capital in excess of par (1,140*$9)		10,260
	(To record the issue of common stock)
2)	Equipment	8,600
	Cash		1,000
	Accounts Payable (8,600-1,000)		7,600
	(To record the purchase of Equipment)
3)	Cash	7,000
	Bank Loan		7,000
	(To record the amount borrowed from bank)
4)	Notes Receivable	600
	Cash		600
	(To record the note receivable from an employee).
5)	Land	20,000
	Cash		4,000
	Mortgage Notes Payable (20,000-4,000)		16,000
	(To record the purchase of land)

Working Note:- It is assumed that common stock is issued at market price of $10.