Question

bombeck inc. has the following transactions during august of the current year. aug. 1: opens an office as a financial advisor, investing $5,000 in cash in exchange for common stock.

Answer 1

The journal entries required are as follows:

Dr. Cash  $5,000

Cr. Stockholder's equity $5,000

What is appropriate journal entries for the $5,000?

The financial advisor is investing in his new company, Bombeck Inc, in other words, the cash of the company would increase by $5,000 whereas the equity capital also increases by the same amount.

In essence, we would debit the receiving account, cash and credit the giving account, stockholder's equity in order to effect the necessary journals in respect of the common stock investment, upon the opening of the office.

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