Question

For this question, review the journal entry and explain what the probable transaction would be requiring the entry, and how this entry is impacting the financial statements. Explaining that account ‘ x’ is a debit/credit etc… is not an acceptable answer. Explanation should cover the actual transaction that occurred. Example Question: Utilities Expense 700 Cash 700 An acceptable answer would be: Client paid current month’s utility bill, asset is decreasing, and net worth is decreasing. Question: Cash 100,000 debit Office Equipment 24,000 debit Common Stock 124,000 credit For this question, review the journal entry and explain what the probable transaction would be requiring the entry, and how this entry is impacting the financial statements. Explaining that account ‘ x’ is a debit/credit etc… is not an acceptable answer. Explanation should cover the actual transaction that occurred. Example Question: Utilities Expense 700 Cash 700 An acceptable answer would be: Client paid current month’s utility bill, asset is decreasing, and net worth is decreasing. Question: Cash 100,000 debit Office Equipment 24,000 debit Common Stock 124,000 credit

Answer 1

Common Stock ($124,000) is issued against cash ($ 100,000) and Office equipment ($ 24,000).

Assets are increasing by $ 124,000 and Net worth is increasing by $ 124,000.

Explanation:

• Cash of $ 100,000 has been received by the client (as Cash is debited)
• Office Equipment of $ 24,000 has been received by the client (as Office Equipment is debited)
• The net worth of $ 124,000 has increased (as common Stock is credit)