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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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Exercise 2-42 Inferring Transactions from Balance Sheet Changes

Each of the following balance sheet changes is associated with a particular transaction:

  1. Cash decreases by $32,000 and land increases by $22,000.
  2. Cash decreases by $9,000 and retained earnings decreases by $9,000.
  3. Cash increases by $100,000 and common stock increases by $100,000.
  4. Cash increases by $15,000 and notes payable increases by $15,000.

Required:

CONCEPTUAL CONNECTION Describe each transaction listed above.

To determine

Introduction:

In order to be recognized in the financial statement, a business event or transaction should influence the elements of accounting equation. For example, paying cash for an expense incurred effects the asset (cash) and stockholders’ equity (retained earnings).

Describe each transaction listed.

Explanation

a. Land increase which means some additional land was purchase and cash decrease due to payment for land.

b. Decrease in retained earnings implies an expense is incurred and decrease in cash means an outflow of cash.

c...

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