Question

Sheffield Corp. recorded journal entries for the issuance of common stock for $206500, the payment of $68000 on accounts payable, and the payment of salaries expense of $105000. What net effect do these entries have on stockholders’ equity?

Answer 1

Answer:

$101,500 increase

Explanation:

Effect on Accounting Equation of the transactions is :

Common Stock Issuance

Equity Increases $206500

Assets Increases $206500

Payment of Accounts Payable

Liabilities decrease $68000

Assets decrease $68000

Payment of Salaries

Equity decrease $105000

Cash decrease $105000

Therefore,

Effect on Equity = $206,500 - $105000

                           = $101,500 increase

Note : Collect only the items affecting equity