Assets = Liabilities + Stockholders’ Equity
Balance Sheet
Assets = Liabilities + Stockholders’ Equity
I/D NA NA
Purchasing land for cash is an asset exchange transaction that increases one asset (land) and decreases another asset (cash). Liabilities and stockholders’
equity are not affected.
References
Short Answer Difficulty: 3 Hard Learning Objective: 01-04 Show how business events affect the
accounting equation.
5.
Award: 10.00 points
6.
Award: 10.00 points
Indicate how this event affects the accounting equation. Use the following letters to record your answer in the box shown below each element. If an event
increases one account and decreases another account within the same element, record I/D. If an event has no impact on the element, record NA. You do not
need to enter amounts.
Increase = I Decrease = D Not Affected = NA
Perez Company paid $220,000 cash in salaries to its employees.
Balance Sheet
Assets = Liabilities + Stockholders’ Equity
Balance Sheet
Assets = Liabilities + Stockholders’ Equity
D NA D
Paying expenses such as salaries is an asset use transaction that decreases the business's assets (cash) and decreases its stockholders’ equity (retained
earnings).
References
Short Answer Difficulty: 3 Hard Learning Objective: 01-04 Show how business events affect the
accounting equation.
Indicate how this event affects the accounting equation. Use the following letters to record your answer in the box shown below each element. If an event
increases one account and decreases another account within the same element, record I/D. If an event has no impact on the element, record NA. You do not
need to enter amounts.
Increase = I Decrease = D Not Affected = NA
Epstein Company paid a $20,000 cash dividend to its stockholders.
Balance Sheet
Assets = Liabilities + Stockholders’ Equity
Balance Sheet
Assets = Liabilities + Stockholders’ Equity
D NA D
Paying a cash dividend is an asset use transaction that decreases a business’s assets (cash) and its stockholders’ equity. The dividends account will decrease
the retained earnings at the end of the accounting period.
References
Short Answer Difficulty: 3 Hard Learning Objective: 01-04 Show how business events affect the
accounting equation.
7.
Award: 10.00 points
8.
Award: 10.00 points
Indicate how this event affects the accounting equation. Use the following letters to record your answer in the box shown below each element. If an event
increases one account and decreases another account within the same element, record I/D. If an event has no impact on the element, record NA. You do not
need to enter amounts.
Increase = I Decrease = D Not Affected = NA
North Company issued a note to purchase a building.
Balance Sheet
Assets = Liabilities + Stockholders’ Equity
Balance Sheet
Assets = Liabilities + Stockholders’ Equity
I I NA
Issuing a note to purchase a building is an asset source transaction that increases a business's assets (building) and increases its liabilities (notes payable).
References
Short Answer Difficulty: 3 Hard Learning Objective: 01-04 Show how business events affect the
accounting equation.
Indicate how this event affects the accounting equation. Use the following letters to record your answer in the box shown below each element. If an event
increases one account and decreases another account within the same element, record I/D. If an event has no impact on the element, record NA. You do not
need to enter amounts.
Increase = I Decrease = D Not Affected = NA
Walker Company issued common stock for $150,000 cash.
Balance Sheet Income Statement
Statement of Cash
Flows Assets = Liabilities +
Stockholders'
Equity Revenue − Expense = Net Income
Balance Sheet Income Statement
Statement of Assets = Liabilities + Stockholders' Equity Revenue − Expense = Net Income
I NA I NA NA NA I
Issuing common stock is an asset source transaction that increases the business's assets (cash) and its stockholders' equity (common stock). It does not affect
the income statement, but is reported as a cash inflow from financing activities in the statement of cash flows.