Question

Question 5 Selected transactions for Front Room, an interior decorator corporation, in its first month of business, are as follows. 1. 2. 3. 4. 5. 6. 7. 8. Issued stock to investors for $16,500 in cash. Purchased used car for $10,200 cash for use in business. Purchased supplies on account for $250. Billed customers $3,790 for services performed. Paid $130 cash for advertising start of the business. Received $1,770 cash from customers billed in transaction (4). Paid creditor $220 cash on account. Paid dividends of $320 cash to stockholders. For each transaction indicate the basic type of account debited and credited (asset, liability, stockholders' equity); the specific account debited and credited (Cash, Rent Expense, Service Revenue, etc.); whether the specific account is increased or decreased; and the normal balance of the specific account. Basic Type No. 1. Asset Account Debited Specific Account Cash Effect Increase Normal Balance Debit Basic Type Stockholders' Equity Account Credited Specific Account Common Stock Effect Increase Normal Balance Credit

Answer 1

Preparing the table indicating the basic type of Accounts Debited and Credited:-

No.		Account		Debited	Account	Credited
	Basic Type	Specific Account	Effect	Normal Balance	Basic Type	Specific Account	Effect	Normal Balance
1.	Assets	Cash	Increase	Debit	Stockholders Equity	Common Stock	Increase	Credit
2.	Assets	Car	Increase	Debit	Assets	Cash	Decrease	Debit
3.	Assets	Supplies	Increase	Debit	Liabilities	Accounts Payable	Increase	Credit
4.	Assets	Accounts Receivable	Increase	Debit	Stockholders Equity	Service Revenue	Increase	Credit
5.	Stockholders Equity	Advertising Expense	Decrease	Debit	Assets	Cash	Decrease	Debit
6.	Assets	Cash	Increase	Debit	Assets	Accounts Receivable	Decrease	Debit
7.	Liabilities	Accounts Payable	Decrease	Credit	Assets	Cash	Decrease	Debit
8.	Stockholders Equity	Dividends	Decrease	Debit	Assets	Cash	Decrease	Debit

Journalizing the Transactions:-

Front Room

General Journal

For the first month

No.	Accounts Title	Debit	Credit
1.	Cash	$16,500
	Common Stock		$16,500
2.	Car	$10,200
	Cash		$10,200
3.	Supplies	$250
	Accounts Payable		$250
4.	Accounts Receivable	$3,790
	Service Revenue		$3,790
5.	Advertising Expense	$130
	Cash		$130
6.	Cash	$1,770
	Accounts Receivable		$1,770
7.	Accounts Payable	$220
	Cash		$220
8.	Dividends	$320
	Cash		$320