Journal Entries Requirement During First Month Of Operation

Journal Entriesrequirement 1during Its First Month Of Operation The

During its first month of operation, the IDEAL Landscaping Corporation, which specializes in residential landscaping, completed various transactions. These include starting the business with a deposit of $24,000 in exchange for common stock, purchasing insurance, paying rent, acquiring landscaping equipment on credit, purchasing supplies on credit, paying utility bills, receiving revenue from landscaping services, paying on accounts payable, declaring and paying dividends, and recording the associated journal entries. Prepare journal entries to accurately record all these transactions using the provided account names. Ensure that debits equal credits for each entry and that all entries balance accordingly.

Paper For Above instruction

IDEAL Landscaping Corporation’s initial month involves multiple financial transactions that must be accurately recorded through journal entries. Beginning with the startup capital, the company deposits $24,000 into its bank account, representing its common stock issuance. This initial deposit increases cash assets and stockholders’ equity. Simultaneously, the company purchases a one-year insurance policy for $2,400, which is recorded as prepaid insurance—a current asset—highlighting the company's prepayment for future coverage.

Additionally, the company pays $2,080 in rent, an expense that reduces cash and increases rent expense for the period. The purchase of landscaping equipment from DVB for $8,800 involves a debit to landscaping equipment, an asset account, and a credit to cash and accounts payable, since $1,200 is paid upfront and the remaining balance is on credit. The chosen account for the unpaid balance is Accounts Payable,, which reflects liabilities incurred from the purchase.

Further, the company purchases landscaping supplies from Meadow Woods Company on credit for $780, immediately recording an increase in supplies (asset) and a corresponding liability in accounts payable. On July 12, utility bills of $308 are paid, which increases utility expenses and decreases cash, reflecting operational costs. Revenue from landscaping services is recorded when received, with cash inflows of $2,724 on July 16 and $2,620 on July 31, each increasing cash and revenue accounts accordingly.

Payments made against accounts payable include a payment of $400 on July 19, decreasing liabilities and cash. Dividends of $1,600 are declared and paid, reducing retained earnings and cash, thereby distributing profits to shareholders. Each transaction must be properly journalized, with debits and credits matching in amount and correctly classified in account categories such as assets, liabilities, equity, revenue, and expenses.

Ensuring the accuracy of this bookkeeping process establishes a clear financial record, essential for preparing financial statements and maintaining sound financial management. All journal entries should be documented sequentially, reflecting the economic reality of the company’s transactions during its first month of operation.

References

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