Following are the transactions of Pitt Inc. for the month of January 2012. a. (S

Question

Following are the transactions of Pitt Inc. for the month of January 2012.

a. (Sample) Borrowed $20,000 from a local bank.
b. Lent $7,000 to an affiliate; accepted a note due in one year.
c. Sold additional stock to investors for $1,000 cash.
d. Purchased $15,000 of equipment, paying $6,000 cash and the rest on a note due in one year.
e. Declared and paid $2,000 in dividends to stockholders.

For each of the above transactions of Pitt Inc. for the month of January 2012, indicate the accounts, amounts, and direction of the effects on the accounting equation. A sample is provided.

Assets = Liabilities + Stockholders’ Equity
a.Cash +20,000 Notes payable +20,000 None 0

Explanation / Answer

Assets Liabilities Equity b. Cash -7000 Notes Receivable +7000 None 0 None 0 c. Cash +1000 None 0 Common Stock +1000 d. Cash -6000, Plant Property & Equipment +15000 Notes Payable +9000 None 0 e. Cash -2000 Retained Earnings -2000

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