Question

The following transactions were completed by the company.
a. The owner (Alex Carr) invested $15,000 cash in the company in exchange for its common stock.
b. The company purchased supplies for $500 cash.
c. The company purchased $10,000 in equipment on credit (record liability as Note Payable).
d. The company purchased $200 of additional supplies on credit.
e. The company purchased land for $9,000 cash.
Required: Enter the impact of each transaction on individual items of the accounting equation. (Enter decreases to account balances with a minus sign.) cash supplies equipment land accounts payable notes payable common stock dividends revenue expenses

Answer 1

Answer:

a.

Assets : Increases (Cash)  $15,000

Liabilities : No Effect

Equity : Increases (Common Stock)  $15,000

b.

Assets : Decrease (Cash)  $500, Increase (Supplies)  $500

Liabilities : No Effect

Equity : No Effect

c.

Assets : Increases (Equipment)  $10,000

Liabilities : Increases (Note Payable)  $15,000

Equity : No Effect

d.

Assets : Increases (Supplies) $15,000

Liabilities :  Increases (Accounts Payable) $15,000

Equity : No Effect

e.

Assets : Increases (Land) $9,000, Decrease (Cash) $9,000

Liabilities : No Effect

Equity : No Effect

Explanation:

The Accounting Equation is : Assets = Equity + Liabilities

So first determine the accounts affected in each transaction and determine their category in the elements of Accounting Equation.

Finally indicate if the category is increasing or decreasing.