Question

Following is a list of transactions that occurred in January for the Yazma Corporation.

1. a) Issued 500 shares of common stock to a new stockholder who paid $20,000 for those shares.

2. b) Borrowed $15,000 in start-up funds from a local bank, and signed a note promising to repay that

   amount in two years.

3. c) Purchased new equipment costing $8,000, paying cash.

4. d) Paid rent ($500 / month) on office space in advance covering the next six months.

5. e) Bought office furniture costing $4,000, on account.

6. f) Paid $750 for this month’s electric bill.

7. g) Earned $3,500 by providing services to customers who agree to pay Yazma within 30 days.

8. h) Paid $900 in wages to their employees.

REQUIRED:

1. For each transaction, identify the account to be debited and the account to be credited, and the dollar amount for each.

2. For each debit and each credit, identify whether that represents an increase (+) or decrease (-) to that account balance.

EXAMPLE FOR 1 AND 2: z) Purchased a truck on account for $9,000, paying cash DEBIT CREDIT ACCOUNT AMOUNT INC/ DEC ACCOUNTAMOUNT INC/DEC z)Truck $9,000Cash $9,000

3. Calculate the ending balance of the Cash account, assuming Yazma started January with a Cash balance of $32,000. Show your calculation.

Answer 1

Explaination for the above transactions S.NO ia) b) Here Yazma corporation issues common stock so cash increases and common stock also increases Borrowing funds from local bank so cash increases and there liability also increases Purchasing of new equipment leads to increase of assets and decrease of cash Rent paid for 6 months in advance so it is prepaid rent it leads to increase in current assets and decrease in cash Purchase of furniture on account leads to increase of assets and increase of creditors Payment of electric bill leads to decrease of expenses and decrease of cash Provide service to customer leads to increase of receivables and increase of revenue Paid wages leads to decrease of expenses and decrease of cash d) g) h)