Part 3: Corporate Business Transactions

There are three business ownership types: (1) proprietorship, (2) partnership, and (3) corporation. Many of their accounting transactions are similar. However, there are some business events that require special transaction handling in accounting entries.

For this part of the assessment, use the Assessment 4, Part 3 Template to identify and prepare entries for the corporate ownership business type.

Imagine you are an accountant for J. Malone's Law Firm, Inc. The accounts and transactions of the firm are listed below. Analyze each transaction. Identify the account or accounts to be debited and credited and, using the provided template, prepare a journal entry for each in the proper format.

Here is an example to record the owner's investment to start the business:

• Cash: $54,000.
• Common stock: $54,000.

Use the following account titles for this scenario:

Assets

1. Cash.
2. Accounts receivable.
3. Prepaid rent.
4. Office equipment.
5. Automobiles.

Liabilities

1. Accounts payable.
2. Interest payable.
3. Note payable.

Owner's Equity

1. Common stock.

Expenses

1. Automobile expense.
2. Rent expense.
3. Utilities expense.
4. Salaries expense.
5. Interest expense.
6. Telephone expense.

Revenues

1. Service revenue.

Transactions

Justin Malone:

1. Invested $54,000 in cash to start the business.
2. Paid $3,000 for 3 month's rent.
3. Bought a used automobile for the firm for $16,000 in cash.
4. Performed services for $3,000 in cash.
5. Paid $400 for automobile repairs.
6. Performed legal services for $3,750 on credit.
7. Borrowed $25,000 from the local bank to help expand his business.
8. Purchased office chairs for $2,100 on credit.
9. Received $1,800 from credit clients.
10. Paid $1,000 on account to reduce the amount owed for the office chairs (purchased in item 8).
11. Issued a check for $560 to pay the monthly utility bill.
12. Purchased office equipment for $8,400. Paid half in cash; the remainder to be paid in 30 days.
13. Issued a check for $5,680 to pay salaries.
14. Performed legal services for $1,850 in cash.
15. Performed legal services for $2,600 on credit.
16. Collected $1,600 on accounts receivable from charge clients.
17. One month's worth of rent (paid in item 2) has expired.
18. One month's interest $145 accrued on the note payable (from item 7).