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Q12-11BE

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Intermediate Accounting (Kieso)
Found in: Page 638

Short Answer

Question: R. Wilson Corporation commenced operations in early 2017. The corporation incurred $60,000 of costs such as fees to underwriters, legal fees, state fees, and promotional expenditures during its formation. Prepare journal entries to record the $60,000 expenditure and 2017 amortization, if any.

Answer

Debited organization expense by $60,000 and credited cash account by the same amount

See the step by step solution

Step by Step Solution

Step 1: Organization Expense

The first cost of forming a corporation is referred to as an organizational cost or charge. Legal and advertising fees to establish the corporation with the state and federal governments are common organizational charges.

Step 2: Journal Entry

Date

Particulars

JF

Debit

Credit

Organization Expense

$60,000

Cash

$60,000

(Being organization expenses paid)

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