Question

For each of the following transactions of Spotlighter, Inc., for the month of January, indicate the accounts, amounts, and direction of the effects on the accounting equation. A sample is provided. (Enter any decreases to account balances with a minus sign.) (Sample) Borrowed $4,240 from a local bank on a note due in six months. Received $4,930 cash from investors and issued common stock to them. Purchased $1,300 in equipment, paying $350 cash and promising the rest on a note due in one year. Paid $450 cash for supplies. Bought and received $850 of supplies on account

Answer 1

1) Cash will increase by $4,240 and Notes Payable will also increase by same amount (i.e. $4,240). Thus total assets and liabilities will increase by $4,240.

2) Cash will increase by $4,930 and common stock will increase by $4,930. Therefore total assets and equity will increase by $4,930.

3) Equipment will increase by $1,300, Cash will decrease by $350 and Notes Payable will increase by $950. Thus total assets and liabilities will increase by $950.

4) Cash will decrease by $450 and Supplies will increase by $450. No effect on total assets and total liabilities.

5) Supplies will increase by $850 and Accounts Payable will also increase by $850. Thus total assets and liabilities will increase by $850.