The following events occurred for Favata Company: Received $15,000 cash from owners and issued stock to them. Borrowed $12,000 cash from a bank and signed a note due later this year. Bought and received $1,300 of equipment on account. Purchased land for $22,000; paid $2,000 in cash and signed a long-term note for $20,000. Purchased $8,000 of equipment; paid $2,000 in cash and charged the rest on account.

a. Dr Cash$15,000

Cr Contributed Capital $15,000

b. Dr Cash $12,000

Cr Notes Payable (short-term) $12,000

c. Dr Equipment $1,300

Cr Accounts Payable $1,300

d. Dr Land $22,000

Cr Cash $2,000

Cr Notes Payable (long-term) $20,000

e. Dr Equipment$8,000

Cr Cash $2,000

Cr Accounts Payable $6,000

Explanation:

Preparation of Journal entries

a. Dr Cash$15,000

Cr Contributed Capital $15,000

b. Dr Cash $12,000

Cr Notes Payable (short-term) $12,000

c. Dr Equipment $1,300

Cr Accounts Payable $1,300

d. Dr Land $22,000

Cr Cash $2,000

Cr Notes Payable (long-term) $20,000

e. Dr Equipment$8,000

Cr Cash $2,000

Cr Accounts Payable $6,000

(8,000-2,000)

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