Question

Brief Exercise 3-10 Cheyenne Corp. has the following transactions during August of the current year. Aug. 1 Issues shares of common stock to investors in exchange for $10,090. Aug. 4 Pays insurance in advance for 3 months, $1,270. Aug. 16 Receives $700 from clients for services rendered. Aug. 27 Pays the secretary $490 salary. Indicate the basic analysis and the debit-credit analysis. Basic Analysis Debit-Credit Analysis Aug. 1 Debits The asset Debit the stockholders' equity account $ Credits Credit Debits Aug. 4 The asset Debit is the asset $ Credits Credit

Answer 1

Ans 1) :

Basic Analysis	Debit - Credit Analysis
Aug 1: Issue shares of common stock to investors in exchange for $10,090.
The Asset Cash is Increased	Debits Increase Asset Debit Cash $10,090
the stockholder's equity account Common Stock  is Increased	Credits Increase Liabilities Credit Common Stock $10,090
Aug 4 : Pays insurance in advance for 3months $1,270	;
The Asset Prepared Insurance is Increased	Debits Increase Assets Debit Prepaid Insurance $1,270
the asset Cash is decreased	Credits Decrease Assets Credit Cash $1,270

2)

	Assets	Liabilities	Stockholder's Equity
Cash	Inventory	Equipment	Accounts Payable	Common Stock	Retained Earnings
1.	$(281,040)		$281,040
2.	$137,930				$137,930
3.		$67,170		$67,170

1. Purchased Equipment for $281,040 cash,
Equipment Account Dr. $281,040
To Cash Account $281,040

2. Issued Common Stock to investors for $137,930 cash
Cash Account Dr. $137,930
To Common Stock Account $137,930

3. Purchased inventory of $67,170 on account
Inventory Account Dr. $67,170
To Accounts Payable Account $67,170