Now, assume that Addison’s savings institution modifies the terms of her account and agrees to pay 5.8% in compound interest on
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Answer:
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Explanation:
<em>Opened a business bank account for Jones, Inc., with an initial deposit of $45,000 in exchange for common stock. </em>
The cash is an asset for the company And Jones Is the Owner thus, asset and equity increase by 45,000
<em>Paid rent on the office building for the month, $2,000. </em>
The rent is an expense is an incurred cost to continue the operations of the business It decreases the equity and asset (cash used to pay the rent)
<em>Received cash for fees earned of $5,000. </em>
The fees are revenue from the business operations this is a realized gain, therefore, increases equity. Also, Assets increase as cash is an asset.
<em>Purchased equipment, $7,000.</em>
There is no change in the quantities but, the composition of the asset did change. Cash decrease while equipment increase.
<em>Borrowed $20,000 by issuing a note payable. </em>
The note payable is a future obligation to pay. It is a liability for the company assumed in exchange for an asset (cash)
<em>Paid salaries for the month, $1,000. </em>
Like rent, this is an incurred cost(expense) It decreases Equity also, assets as we use cash to pay it.
<em>Received cash for fees earned of $8,000.</em>
Exactly like the previous time, a realized gain generates an increase in equity and assets.
<em>Paid dividends, $3,000.</em>
The dividends are paid to the company's owners thus, the cash leaves the company into the owner's pocket. Both, assets and equity decrease (as there are fewer assets available for the owners to take)
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<em>Paid interest on the note, $100.</em>
The interest also is an incurred cost thus, like salaries and rent expense we decrease equity and assets.