Question

Cardinal Company is considering a five-year project that would require a $2,915,000 investment in equipment with a useful life of five years and no salvage value. The company’s discount rate is 12%. The project would provide net operating income in each of five years as follows:

Sales $ 2,746,000
Variable expenses 1,126,000
Contribution margin 1,620,000
Fixed expenses:
Advertising, salaries, and other fixed out-of-pocket costs $615,000
Depreciation 583,000
Total fixed expenses 1,198,000
Net operating income $ 422,000

Prepare journal entry

Answer 1

Answer:

Cardinal Company

Journal Entries:

                                           Debit               Credit

Equipment                        $2,915,000

Cash                                                        $2,915,000

To record investment in equipment.

Cash                                $2,746,000

Sales                                                      $2,746,000

To record revenue from customers.

Variable Expenses        $1,126,000

Cash                                                    $1,126,000

To record payment to suppliers.

Advertising & Others      $615,000

Cash                                                     $615,000

To record payment for expenses.

Equipment Depreciation$583,000

Accumulated Equipment Depreciation $583,000

To record depreciation charge for the year.

Explanation:

Journal entries record business transactions as they occur on a daily or periodic basis.  They show the accounts to be debited and the accounts to be credited in the Ledger.  Journal entries are the first records made in the books of accounts to capture transactions.  They have a note explaining the details of each transaction.