Problem 1—45 Points Prepare journal entries to record the following 2018 transactions of Diagnostic
Corporation.
1. Several investors provided $400,000 cash (total) and received shares of common stock in Diagnostic
Corporation.
Cash $400,000
Common Stock $400,000
2. Diagnostic purchased merchandise on account, $870,000.
Merchandise Inventory $870,000
Accounts Payable $870,000
3. Diagnostic sold merchandise for $1,000,000 and received $650,000 from customers. The balance
was sold on account. The cost of the merchandise that was sold was $383,000.
Cash $650,000
Accounts Receivable $350,000
Sales Revenue $1,000,000
Cost of Goods Sold $383,000
Merchandise Inventory $383,000
4. Diagnostic borrowed $340,000 on a 6-month, 6% note from its bank.
Cash $340,000
Notes Payable $340,000
5. Diagnostic purchased equipment costing $100,000. The company paid $20,000 down and signed a
note for the balance.
Equipment $100,000
Notes Payable $80,000
Cash $20,000
6. Diagnostic purchased supplies on account, $31,590.
Supplies Inventory $31,590
Accounts Payable $31,590
7. Diagnostic paid employees their monthly wages, $46,000.
Wages Expense $46,000
Cash $46,000
8. Diagnostic purchased a two-year insurance policy for $30,000.
Prepaid Insurance $30,000
Cash $30,000
9. Diagnostic paid $412,000 on account.
Accounts Payable $412,000
Cash $412,000
10. Diagnostic collected $200,000 on account.
