Question

Geraldine Parker, the owner of Gi Grs Dance Studio, Inc., started the business by investing $10,000 cash and donating a building worth $20,000. Identfy the general jourmal entry below that Gi Gřs will make to record the transaction. A. Cash 30. Common Stock 0,000 B. Common Stock 30 Cash 10,000 Building 20,000 C. Cash 10,000 Building 20.000 Common Stock D. Common S Stock 30,000 Retained Eamings E. Cash & Builing 30,000 Common Stock 30,000

Answer 1

Answer:

The correct option is B,common stock 30,000 cash 10,000 and building 20,000

Explanation:

Geraldine Parker's contributions  to the business -that is both cash and building are seen as his capital invested in the business.Invariably, it is assumed the new business owes Geraldine Parker the worth of resources invested

Appropriate double entries for the transaction  are shown below

Dr Cash              $10000

Dr Building          $20000

Cr Capital                           $30000

This is the capital as at the start of the business,it is also possible that Geraldine Parker contributes additional capital which adds to existing capital.

Also,the profits made increases the stake of the owner in the business and drawings  should e deducted from the capital  in case the owner withdraws cash or goods from the business.