Question

Question No. (9) (1 minute): Maso Company recorded journal entries for the following: Issuance of ordinary shares for $40,000 cash • Payment cash of $13,000 to the accounts payable • Payment of salaries expense cash of $21,000 • Providing services of $8,000 on account · Collection cash of $7,000 from the Accounts Receivable What NET effect do these entries have on Equity? Show your calculations

Answer 1

Solution:

Journal Entries in books of Maso company.

	Debit Amount	Credit Amount
Cash Debit	$ 40,000
To Common stock		$ 40,000
( Issuance of ordinary shares for $ 40,000 )
Accounts Payable Debit	$ 13,000
To Cash		$ 13,000
( Cash paid for Accounts payable )
Salaries Expense Debit	$ 21,000
To Cash		$ 21,000
( Cash paid for Salaries )
Accounts Receivable Debit	$ 8,000
To Service Revenue		$ 8,000
( Provided services on account )
Cash Debit	$ 7,000
To Accounts Receivable		$ 7,000
( Cash received from account receivables )

Net effect on equity:

	Amount $
Capital issued	$ 40,000
Add: income for the year	- $ 13,000
Increase in Equity	$ 27,000

Income generated = Revenue - Expense

= Revenue from services - Salaries expense

= $ 8,000 - $ 21,000

= $ 13,000 (loss)

~~~~~~~~~

Please upvote , Thankyou.