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25 April, 18:21

The following events occurred for Johnson Company: a. Received investment of $39,000 cash by organizers and distributed 1,190 shares of $1 par value common stock to them. b. Purchased $7,100 of equipment, paying $1,300 in cash and signing a note for the rest. c. Borrowed $15,000 cash from a bank.

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  1. 25 April, 19:31
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    Cash 39.000 debit

    Common Stock 1,190 credit

    Additional Paid-in 37,810 credit

    Equipment 7,100 debit

    Cash 1,300 credit

    Note payable 5,800 credit

    Cash 15,000 debit

    Note payable 15,000 credit

    Explanation:

    We debit the cash received and credit the face value of the common stock

    the difference is label as additional paid-in common stock which, is also credited.

    as the equipment is worth 7,100 and we paid 1,300 cash the differnece: 7,100 - 1,300 = 5,800 is the principal of the note signed

    As the equipment which enters the firm is an asset it wil lbe debited.

    the cash is being used thus, credited and the note is a liability hence credit as well

    the third event consist of a inflow of cash thus debit and taking a liability therefore, credit.
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