Question

Martinez Corp. has the following transactions during August of the current year.

Aug. 1 Issues shares of common stock to investors in exchange for $10,930.
4 Pays insurance in advance for 3 months, $1,760.
16 Receives $810 from clients for services rendered.
27 Pays the secretary $570 salary.
Journalize the transactions.

Answer 1

Aug 1

Cash $10930 Dr

Common Stock $10930 Cr

Aug 4

Prepaid Insurance $1760 Dr

Cash $1760 Cr

Aug 16

Cash $810 Dr

Service Revenue $810 Cr

Aug 27

Salary Expense $570 Dr

Cash $570 Cr

Step-by-step explanation:

Aug 1

The receipt of cash in exchange of common stock is recorded as a debit to cash which is an asset and a credit to common stock which is capital

Aug 4

Prepayment of any expense is recorded as a current asset. Thus, prepaid insurance is debited as asset increases and cash is credited as cash decreases.

Aug 16

The receipt of cash in exchange of service provision is recorded as a credit to service revenue and a debit to cash

Aug 27

Payment of salary is an expense and is recorded as a debit to salary expense and a credit to cash.