The following transactions occur for Cardinal Music Academy during the month of October: Provide music lessons to students for $17,000 cash. Purchase prepaid insurance to protect musical equipment over the next year for $4,200 cash. Purchase musical equipment for $20,000 cash. Obtain a loan from a bank by signing a note for $30,000. Record the transactions. The company uses the following accounts: Cash, Prepaid Insurance, Equipment, Notes Payable, and Service Revenue.

Question

Eleanor Roach

Business

9 October, 05:03

The following transactions occur for Cardinal Music Academy during the month of October: Provide music lessons to students for $17,000 cash. Purchase prepaid insurance to protect musical equipment over the next year for $4,200 cash. Purchase musical equipment for $20,000 cash. Obtain a loan from a bank by signing a note for $30,000. Record the transactions. The company uses the following accounts: Cash, Prepaid Insurance, Equipment, Notes Payable, and Service Revenue.

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Answers (1)

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Allan Townsend · Answer 1

See explanation section

Explanation:

1. Debit Cash $17,000

Credit Service revenue (music) $17,000

Note: The academy receives cash by providing music services to the students.

2. Debit Prepaid Insurance $4,200

Credit Cash $4,200

Note: The academy paid cash in advance to purchase insurance policy.

3. Debit Musical Equipment $20,000

Credit Cash $20,000

Note: The academy paid cash for acquiring musical equipment.

4. Debit Cash $30,000

Credit Notes payable $30,000

Note: The academy borrowed cash by signing a notes from the bank.