Question

Assume Downer.com was organized on May 1, to compete with Despair, Inc.-a company that sells demotivational posters and office products. The following events occurred during the first month of Downer.com's operations. a. Received $60,000 cash from the investors who organized Downer.com Corporation. b. Borrowed $20,000 cash and signed a note due in two years. c. Ordered computer equipment costing $16,000. d. Purchased $9,000 in equipment, paying $2,000 in cash and signing a six-month note for the balance. e. Received the equipment ordered in (c) paid for half of it, and put the rest on account Required: 1. For each of the events (a) through (e). perform transaction analysis and indicate the amount of effect on the accounting equation. (Enter any decreases to account balances with a minus sign.) Assets Liabilities ST Notes Payable Shareholders Equity Contributed Capital Cash Accounts Payable Equipment LT Notes Payable Beg. a. b. C. d. e. End.

Answer 1

Answer
	Explanation :
1)		Cash	Equipment	Account payable	ST note payable	LT note payable	Contributed Capital
	Beg
	a	$            60,000					$        60,000
	b	$            20,000				$        20,000
	c	NO EFFECT
	d	$             -2,000	9000		$          7,000
	e	$             -8,000	16000	$          8,000
		$            70,000	$        25,000	$          8,000	$          7,000	$        20,000	$        60,000

2)	Journal entry
	a)	Cash	$        60,000
		To, Common stock		$        60,000
		[Issuance of common stock ]
	b)	Cash	$        20,000
		To, Note payable (Long term)		$        20,000
		[Long term Note payable issued ]
	c)	No Entry	$                -	$                -
	d)	Equipment	$          9,000
		To, Cash		$          2,000
		To, Note payable (Short term)		$          7,000
		[Equipment purchased in against of paying cash and issuance of a note ]
	e)	Equipment	$        16,000
		To, Cash		$          8,000
		To, Accounts payable		$          8,000
		[Equipment purchased on partially on cash and rest on account]

3)	Asset		Liability
	Current Asset	Amount	Current Liability	Amount
	Cash	$        70,000	Account payable	$          8,000
			ST note payable	$          7,000
	Total Current Asset	$        70,000	Total Current Liability	$        15,000
	Non-Current Asset		LT note payable	$        20,000
	Equipment	$        25,000	Total Liability	$        35,000
			Shareholder's Equity
			Contributed capital	$        60,000
			Total Shareholder's Equity	$        60,000
	Total Assets	$        95,000	Total Liability and Equity	$        95,000