Freitas Corporation was organized early in 2009. The following expenditures were made during the first few months of the year:
Attorneys' fees in connection with the organization of the corporation $12,000
State filing fees and other incorporation costs 3,000
Purchase of the patent 20,000
Legal and other fees for transfer of the patent 2,000
Purchase of furniture 30,000
Pre-opening salaries 40,000
total $107,000
Prepare a summary journal entry to record the $107,000 in cash expenditures.
Organization cost expense 12,000+3,000) $15,000
Patent ($20,000 + 2,000) $22,000
Furniture $30,000
Pre-opening expenses $40,000
Cash 107,000
To prepare a summary journal entry to record the $107,000 in cash expenditures for Freitas Corporation, we will need to categorize each expenditure accordingly. Here's how the journal entry would look:
Debit:
Organization Expense $12,000
Incorporation Expense $3,000
Patent Expense $22,000
Furniture Expense $30,000
Pre-Opening Salaries Expense $40,000
Credit:
Cash $107,000
The journal entry records the cash expenditures by debiting the corresponding expense accounts and crediting the cash account.
To prepare a summary journal entry for the $107,000 in cash expenditures, you would need to categorize the expenses into appropriate accounts. Here's how you can do it:
1. Attorneys' fees in connection with the organization of the corporation:
- Debit: Organizational Expenses (an intangible asset account)
- Credit: Cash
2. State filing fees and other incorporation costs:
- Debit: Organizational Expenses (an intangible asset account)
- Credit: Cash
3. Purchase of the patent:
- Debit: Patent (an intangible asset account)
- Credit: Cash
4. Legal and other fees for transfer of the patent:
- Debit: Patent (an intangible asset account)
- Credit: Cash
5. Purchase of furniture:
- Debit: Furniture and Fixtures (a tangible asset account)
- Credit: Cash
6. Pre-opening salaries:
- Debit: Salaries Expense (an expense account)
- Credit: Cash
Now, let's summarize the debit and credit entries:
Debits:
- Organizational Expenses: $12,000 (attorneys' fees) + $3,000 (filing fees) = $15,000
- Patent: $20,000 (purchase of patent) + $2,000 (transfer fees) = $22,000
- Furniture and Fixtures: $30,000
- Salaries Expense: $40,000
Credits:
- Cash: $107,000
Therefore, the summary journal entry to record the $107,000 in cash expenditures would be:
Debit:
- Organizational Expenses: $15,000
- Patent: $22,000
- Furniture and Fixtures: $30,000
- Salaries Expense: $40,000
Credit:
- Cash: $107,000