Question

Lisa Frees and Amelia Ellinger have been operating a catering business for several years. In March, the partners plan to expand by opening a retail sales shop. They have decided to form the business as a corporation called Traveling Gourmet, Inc. The following transactions occurred in March:

1. Received $100,000 cash from each of the two shareholders to form the corporation, in addition to $4,000 in accounts receivable, $9,300 in equipment, a van (equipment) appraised at a fair value of $17,000, and $2,200 in supplies. Gave the two owners each 900 shares of common stock with a par value of $1 per share.
2. Purchased a vacant store for sale in a good location for $560,000, making a $112,000 cash down payment and signing a 10-year mortgage from a local bank for the rest.
3. Borrowed $70,000 from the local bank on a 10 percent, one-year note.
4. Purchased and used food and paper supplies costing $14,830 in March; paid cash.
5. Catered four parties in March for $6,200; $2,000 was billed, and the rest was received in cash.
6. Made and sold food at the retail store for $12,900 cash.
7. Received a $620 telephone bill for March to be paid in April.
8. Paid $563 in gas for the van in March.
9. Paid $10,280 in wages to employees who worked in March.
10. Paid a $500 dividend from the corporation to each owner.
11. Purchased $70,000 of equipment (refrigerated display cases, cabinets, tables, and chairs) and renovated and decorated the new store for $30,000 (added to the cost of the building); paid cash.

Required:

2. Record in the T-accounts the effects of each transaction for Traveling Gourmet, Inc., in March. Compute ending balances.

Cash Accounts Receivable Beg. Bal. Beg. Bal. End. Bal. 0 0 End. Bal. 0 Supplies Equipment Beg. Bal. Beg. Bal. End. Bal. 0 End. Bal. 0 Building Accounts Payable Beg. Bal. Beg. Bal. End. Bal. 0 End. Bal. 0 Note Payable Mortgage Payable Beg. Bal. Beg. Bal. End. Bal. 0 End. Bal.

Answer 1

cash a/c
particulars	debit	particulars	credit
To capital	200000	building	112000
short term borrowing	70000	stock (food & paper)	14830
account receivables	1930	gas expenses	563
sales (food)	12900	wages	10280
		refrigerator	70000
		building	30000
		balance carried forward	47157
	284830		284830

capital a/c
particulars	debit	particulars	credit
		capital contributions
		cash	200000
		account receivables	4000
		equipment	17000
balance carried down	221000
	221000		221000

stock a/c
particulars	debit	particulars	credit
food and papers	14830	by sales	12900
		cash a/c	1930
	14830		14830

outstanding expenses a/c
particulars	debit	particulars	credit
		telephone bill	620
		interest on borrowing	7000
balance carried down	7620
	7620		7620

common stock a/c
particulars	debit	particulars	credit
		common stock	1800

mortgage loan
particulars	debit	particulars	credit
		by store	448000
balance carried down	448000
	448000		448000

building
particulars	debit	particulars	credit
cash	112000
mortgage loan	448000
cash	30000
		balance carried down	590000
	590000		590000

current liabilities
particulars	debit	particulars	credit
		short term borrowings	70000
balance carried down	70000		70000

account receivables
particulars	debit	particulars	credit
bal b/d	4000
sale of food	8200
		balance carried down	12200
	12200		12200