Overnight Delivery Inc. is incorporated on February 1 and enters into the following transactions during its first month of operations:
February 15: Received $8,000 cash from customer accounts.
February 26: Provided $16,800 of services on account during the month.
February 27: Received a $3,400 bill from the local service station for gas and oil used during February.
February 28: Paid $400 for wages earned by employees for the month.
February 28: Paid $3,230 for February advertising.
February 28: Declared and paid $2,000 cash dividends to stockholders.
Required
1. Prepare journal entries on the books of Overnight to record the transactions entered into during February.
2. Explain why you agree or disagree with the following: The transactions on February 28 all represent expenses for the month of February because cash was paid. The transaction on February 27 does not represent an expense in February because cash has not yet been paid.