Exercises Day 1 Solution
Chapter 02 - Investing and Financing Decisions and the Accounting System
HANDOUT 2 – 1 SOLUTION, continued
ANALYZING TRANSACTIONS
Analyze each of the following transactions of World Wide Webster by performing each of the following.
Then, use the chart on the following page to keep track of the amount in each account:
(a) Stockholder invests $10,000 into the business in exchange for 10,000 shares of $1 par value common stock. 1. Decide if a transaction took place.
Yes – received cash and gave stock.
2. Identify the accounts affected.
Cash and Common Stock
3. Classify each account affected.
Cash is an Asset (A) and Common Stock is
Stockholders’ Equity (SE)
4. Identify direction and amount.
Cash (A) + $10,000 = Common Stock (SE) + $10,000.
5.
Ensure the accounting equation is in balance. Yes – see below.
(b) Borrow $15,000 signing a note payable to the bank that is due in three months.
1. Decide if a transaction took place.
Yes – received cash and gave a note payable.
2. Identify the accounts affected.
Cash and Notes Payable
3. Classify each account affected.
Cash is an Asset (A) and Notes Payable is a Liability (L)
4. Identify direction and amount.
Cash (A) + $15,000 = Notes payable + $15,000.
5.
Ensure the accounting equation is in balance. Yes – see below.
(c) Acquire a $15,000 truck and $5,000 worth of equipment.
1.
Decide if a transaction took place.
Yes – paid cash and received truck and equipment.
2.
Identify the accounts affected.
Cash and Equipment
3.
Classify each account affected.
Cash is an Asset (A) and Equipment is an Asset (A)
4.
Identify direction and amount.
Cash (A) - $20,000 and Equipment (A) + $20,000
5.
Ensure the accounting equation is in balance.
Yes – see below.
2-1
Copyright © 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
Chapter 02 - Investing and Financing Decisions and the Accounting System
HANDOUT 2 – 1
HANDOUT 2 – 1 SOLUTION, continued
ANALYZING TRANSACTIONS
Analyze each of the following transactions of World Wide Webster by performing each of the following.
Then, use the chart on the following page to keep track of the amount in each account:
(a) Stockholder invests $10,000 into the business in exchange for 10,000 shares of $1 par value common stock. 1. Decide if a transaction took place.
Yes – received cash and gave stock.
2. Identify the accounts affected.
Cash and Common Stock
3. Classify each account affected.
Cash is an Asset (A) and Common Stock is
Stockholders’ Equity (SE)
4. Identify direction and amount.
Cash (A) + $10,000 = Common Stock (SE) + $10,000.
5.
Ensure the accounting equation is in balance. Yes – see below.
(b) Borrow $15,000 signing a note payable to the bank that is due in three months.
1. Decide if a transaction took place.
Yes – received cash and gave a note payable.
2. Identify the accounts affected.
Cash and Notes Payable
3. Classify each account affected.
Cash is an Asset (A) and Notes Payable is a Liability (L)
4. Identify direction and amount.
Cash (A) + $15,000 = Notes payable + $15,000.
5.
Ensure the accounting equation is in balance. Yes – see below.
(c) Acquire a $15,000 truck and $5,000 worth of equipment.
1.
Decide if a transaction took place.
Yes – paid cash and received truck and equipment.
2.
Identify the accounts affected.
Cash and Equipment
3.
Classify each account affected.
Cash is an Asset (A) and Equipment is an Asset (A)
4.
Identify direction and amount.
Cash (A) - $20,000 and Equipment (A) + $20,000
5.
Ensure the accounting equation is in balance.
Yes – see below.
2-1
Copyright © 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
Chapter 02 - Investing and Financing Decisions and the Accounting System
HANDOUT 2 – 1