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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881

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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
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Cornerstone Exercise 2-21 Transaction Analysis

Morgan Inc. entered into the following transactions:

  1. Issued common stock to investors in exchange for $30,000 cash;
  2. Borrowed $104000 dish from First State Bank.
  3. Purchased $3,000 of supplies on credit.
  4. Paid for the purchase in Transaction c.

Required:

Show the effect of each transaction using the following model.

Chapter 2, Problem 21CE, Cornerstone Exercise 2-21 Transaction Analysis Morgan Inc. entered into the following transactions:

To determine

Concept Introduction:

Transaction Analysis- The first step involved in the process of recording economic events in any business is to analyze the transaction. Transaction analysis is the process of analyzing each transaction to determine the effect of each transaction in two parts or dual effect on each element of an accounting equation so that the equation is in balance. This is shown as:

  Assets=liabilities+Stockholdersequity

Requirement 1:

To show the effect of transaction on Morgan Inc. when common stock is issued to investors in exchange for $30000 cash.

Explanation

Morgan Inc. has issued common stock to investors for $30000 cash which has increased assets (cash) by sale of stock and increased the contributed capital or common stock. Therefore, there is dual effect. This will be shown in accounting equation as:

  Assets        =  Liabilities   +     Stockholder's Equity                                                Contributed  (+) Retained                                             &

To determine

Concept Introduction:

Transaction Analysis- The first step involved in the process of recording economic events in any business is to analyze the transaction. Transaction analysis is the process of analyzing each transaction to determine the effect of each transaction in two parts or dual effect on each element of an accounting equation so that the equation is in balance. This is shown as:

  Assets=liabilities+Stockholdersequity

Requirement 2:

To show the effect of transaction on Morgan Inc. when cash of $10000 borrowed from First State Bank.

To determine

Concept Introduction:

Transaction Analysis- The first step involved in the process of recording economic events in any business is to analyze the transaction. Transaction analysis is the process of analyzing each transaction to determine the effect of each transaction in two parts or dual effect on each element of an accounting equation so that the equation is in balance. This is shown as:

  Assets=liabilities+Stockholdersequity

Requirement 3:

To show the effect of transaction on Morgan Inc. when supplies of $3000 is purchased on credit.

To determine

Concept Introduction:

Transaction Analysis- The first step involved in the process of recording economic events in any business is to analyze the transaction. Transaction analysis is the process of analyzing each transaction to determine the effect of each transaction in two parts or dual effect on each element of an accounting equation so that the equation is in balance. This is shown as:

  Assets=liabilities+Stockholdersequity

Requirement 4:

To show the effect of transaction on Morgan Inc. when amount of $3000 is paid for purchase of supplies on credit.

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