Question

Complete the following table, indicating the sign and amount of the effect (+ for increase, - for decrease, and NE for no effect) of each transaction. Provide an account name for any revenue or expense transactions included in stockholders' equity. Consider each item independently.
a. Issued 10,000 shares of stock for $90,000 cash.
b. Equipment costing $4,000 was purchased by issuing a long-term note payable.
c. Recorded depreciation of $1,000 on the equipment

Answer 1

Transaction	Assets	Liabilities	Stockholders’ Equity
a.	+90,000	NE	Contributed Capital     +90,000
b.	+4,000	+4,000	NE
c.	-1,000	NE	Depreciation Expense (+E)       –1,000

 

The effects of the transactions can be seen by making the related journal entries.

 

a. dr   Cash (+A)  ......................................................................     90,000

     cr   Contributed Capital (+SE)  .................................       90,000

 

b. dr   Equipment (+A)  ............................................................       4,000

     cr   Note Payable (long-term) (+L)............................         4,000

 

c. dr   Depreciation Expense (+E, –SE)  ...................................       1,000

    

 cr   Accumulated Depreciation (+xA,-A)..................         1,000