Question

QUESTION 4 Record the transaction below Shareholders' Equity The following events took place in the month of April AssetsLiabilities Common Stock Retained Earnings Purchased equipmen AN ANSWER MUST BE SELECTED FOR EACH COLUMN EVEN IF THERE IS NO EFFECT. IF THERE IS NO EFFECT, SELECT "O NO EFFECT." Assets -Liabilities - Common Stock 7,200 Equipment; (7,200) Cash B. 0 No Effect '7,200 Cost of Goods Sold 7,200 Rent Expense 7,200 Prepaid Rent 7,200 Cash (7,200 ) Prepaid Rent (7,200 ) Cost of Goods Sold Retained Earnings

Answer 1

Purchase of equipment of $ 7,200 means increases of the Fixed assets by $ 7,200
Amount of purchase is paid in Cash so there is no current liability to pay for this but cash or current assets will decrease with $ 7,200
And this have no effect on common stock and retained earnings
Journal entry of the same is passed as beloe
Journal Entries
Date	Account Title and explanation	Debit	Credit
April	Equipment	$                        7,200
	To Cash		$                       7,200
	Above transaction will show as below,
	Answer =			Shareholder's Equity
		Assets	Liabilities	Common Stock	Retained Earnings
	Purchase Equipment	A - 7,200 Equipment ; (7,200) Cash	B. 0 No Effect	B. 0 No Effect	B. 0 No Effect