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College Accounting (Book Only): A ...

13th Edition
Scott + 1 other
ISBN: 9781337280570

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BuyFindarrow_forward

College Accounting (Book Only): A ...

13th Edition
Scott + 1 other
ISBN: 9781337280570
Textbook Problem

R. Nelson invests his personal computer, with a fair market value of $2,500, in the business. How would this transaction be recorded?

  1. a. A debit to R. Nelson, Capital, $2,500.
  2. b. A credit to Cash, $2,500.
  3. c. A credit to Professional Fees, $2,500
  4. d. A debit to Computer, $2,500.

To determine

State the manner in which the transaction would be recorded.

Explanation

T-account:

Trial balance is the summary of accounts, and their debit and credit balances at a given time.  It is usually prepared at end of the accounting period.  Debit balances are listed in left   column and credit balances are listed in right column.  The totals of debit and credit column should be equal.  Trial balance is useful in the preparation of the financial statements.

Justification for the incorrect option of a:

If person R invests personal computer, with a fair market value of $2,500, in the business, then the capital account of Person R will be credited with $2,500. Therefore, it is an incorrect option.

Justification for the incorrect option b:

Cash account is not affected by this transaction...

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