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Question

connect.htre ools Help "2-webTA Timesheet Surmrn. Pages Enterp Docu ments for Drectors..wActive Recrutments-ble.. WAISLpo MasteO750 A. hep ne Serne.. ter 3 and 4 0 Required information The following information applies to the questions displayed below The following transactions occurred during March, the first month of operations for Quality Galleries, Inc Capital stock was issued in exchange for $354,000 cash Purchased $168,000 of equipment by making a $54,000 cash down payment and signing a note payable for the balance Made a $32,000 cash payment on the note payable from the purchase of equipment Sold a piece of equipment for cash of $12,000. The equipment was sold at cost, so there is no gain or loss on the sale What is the balance in the Cash account at the end of March? Mutiple Choice $280,000 5334,000 0

Explanation / Answer

Let’s prepare the journal entry first for each transaction for Quality Galleries

Journal Entry

Date

Particulars

Debit

Credit

March

Cash A/c Dr.

354000

                          To Capital Stock A/c

354000

(..... Nos Capital stock issued at value of $... In consideration of cash)

March

Equipment A/c Dr.

168000

           To Cash A/c

54000

           To Notes Payable A/c

114000

(Equipment purchase of $168,000: Cash 54000, Notes issued: 114000)

March

Notes Payable A/c Dr.

32000

           To Cash A/c

32000

(Notes payable paid in cash)

March

Cash A/c Dr.

12000

           To Equipment A/c

12000

(Notes payable paid in cash)

Note: Cash A/c will be debited for every transaction wherever there is cash receipt to company while it will be credited whenever there is cash outflow.

To arrive at closing cash balance, let’s prepare Cash ledger:

Dr.

Cr.

Cash A/c(March)

Particulars

Amount

Particulars

Amount

To Capital Stock A/c

354000

By Equipment A/c Dr.

54000

TO Equipment A/c

12000

By Notes Payable A/c

32000

Closing Balance (balancing figure)

280000

Total

366000

Total

366000

Hence Closing Balance for Cash is $280,000

Journal Entry

Date

Particulars

Debit

Credit

March

Cash A/c Dr.

354000

                          To Capital Stock A/c

354000

(..... Nos Capital stock issued at value of $... In consideration of cash)

March

Equipment A/c Dr.

168000

           To Cash A/c

54000

           To Notes Payable A/c

114000

(Equipment purchase of $168,000: Cash 54000, Notes issued: 114000)

March

Notes Payable A/c Dr.

32000

           To Cash A/c

32000

(Notes payable paid in cash)

March

Cash A/c Dr.

12000

           To Equipment A/c

12000

(Notes payable paid in cash)

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