144) Prepare journal entries to record the following transactions of Daisy King Ice Cream

Company. If an entry is not required, state "No Entry."

1. Started business by issuing 10,000 shares of common stock for $20,000.

2. Signed a franchise agreement to pay royalties of 5% of sales.

3. Leased a building for three years at $500 per month and paid six months' rent in advance.

4. Purchased equipment for $5,400, paying $1,000 down and signing a two-year, 10% note for

the balance.

5. Purchased $1,800 of supplies on account.

6. Recorded cash sales of $800 for the first week.

7. Paid weekly salaries and wages, $320.

8. Paid for supplies purchased in item (5).

9. Paid royalties due on first week's sales.

10. Recorded depreciation on equipment, $50.

Answer:

1. Cash 20,000

Common stock 20,000

2. No Entry.

3. Prepaid rent 3,000

Cash 3,000

4. Equipment 5,400

Cash 1,000

Notes payable 4,400

5. Supplies inventory 1,800

Accounts payable 1,800

6. Cash 800

Sales revenue 800

7. Salaries and wages expense 320

Cash 320

8. Accounts payable 1,800

Cash 1,800

9.

Royalty expense 40

Cash 40

10. Depreciation expense 50

Accumulated depreciation 50

=> How can we know

Royalty expense is 40