Question

Following are transactions of Gotebo Tanners, Inc., a new company, during the month of January: Issued 10,000 shares of common stock for $15,000 cash. Purchased land for $12,000, signing a note payable for the full amount. Purchased office equipment for $1,200 cash. Received cash of $14,000 for services provided to customers during the month. Purchased $300 of office supplies on account. Paid employees $10,000 for their first month's salaries. How many of these transactions decreased Gotebo's total assets?

Answer 1

Answer:

Transaction #6 decreases Gotebo's total assets.

Explanation:

Let's assess each transaction:

1. Issued 10,000 shares of common stock for $15,000 cash: this transaction increases cash (Asset) and owners' equity.

2. Purchased land for $12,000, signing a note payable for the full amount: This transaction increases land, which is an asset account and increases note payable, which is a liability account.

3. Purchased office equipment for $1,200 cash: This transaction increases equipment (Asset) and decreases cash (Asset). Therefore, no effect on the total assets.

4. Received cash of $14,000 for services provided to customers during the month: This transaction increases the cash (Asset) and increases owners' equity (Revenue side).

5. Purchased $300 of office supplies on account: It increases supplies (Asset) and accounts payable (Liability).

6. Paid employees $10,000 for their first month's salaries: This transaction decreases cash (Asset) and increases expenses, which decreases owners' equity.

Therefore, only transaction #6 decreased Gotebo's total assets by $10,000.