Question 7 (of 7) value 2.16 points E2-4 Determining Financial Statement Effects

Question

Question 7 (of 7) value 2.16 points E2-4 Determining Financial Statement Effects of Several Transactions The following events occurred for Favata Company a. Received $10,000 cash from owners and issued stock to them. b. Borrowed $7,000 cash from a bank and signed a note due later this year. c. Bought and received $800 of equipment on account. d. Purchased land for $12,000; paid $1,000 in cash and signed a long-term note for $11,000. e. Purchased $3,000 of equipment, paid $1,000 in cash and charged the rest on account Required For each of the events (a) through (e), perform transaction analysis and indicate the account, amount, and direction of the effect (+for increase and- for decrease) on the accounting equation. Check that the accounting equation remains in balance after each transaction. (Enter all amounts as positive values.j Assets a. b. C. d. Totals

Explanation / Answer

Favata Company (All amounts in $) Journal Entries in respect of transactions incurred a. Cash A/c DR 10000 Increase in Assets To Common Stock A/c 10000 Increase in Shareholders' Equity b. Cash A/c DR 7000 Increase in Assets To Note Payable A/c 7000 Increase in Liabilities c. Equipment A/c DR 800 Increase in Assets To Accounts Payable A/c 800 Increase in Liabilities d. Land A/c DR 12000 Increase in Assets To Cash A/c 1000 Decrease in Assets To Long-Term Note A/c 11000 Increase in Liabilities e. Equipment A/c DR 3000 Increase in Assets To Cash A/c 1000 Decrease in Assets To Accounts Payable A/c 2000 Increase in Liabilities

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