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7 September, 20:11

On Jan. 2, Callie Taylor invests $40,000 into the business in exchange for common stock. She journalize the transaction as follows but something is wrong with the journal entry. Use your knowledge of what a correct journal entry should look like to identify everything that is wrong.

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  1. 7 September, 22:59
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    See explanation section.

    Explanation:

    The correct journal to record this transaction is -

    Cash Debit $40,000

    Common stock Credit $40,000

    Note: As Callie Taylor invests the amount in exchange for common stock, An asset (cash) will be increased, and equity (common stock) will be increased. An increase in asset means debit, while an increase in equity means credit.
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