Answer:
a. Assets increase by $16,200; and Shareholders' equity increases by $16,200.
b. Assets increase by $800; and Assets decrease by $800.
c. Assets increase by $10,600; and Shareholders' equity increases by $10,600.
d. Assets increase by $260; and Liabilities increases by $260.
e. Assets increase by $9,600; and Assets decrease by $9,600.
Explanation:
The accounting equation that is impacted is given as follows:
Assets = Shareholders' equity + Liabilities
The impact of each transaction on individual items of the accounting equation are as follows:
a. The owner invested $16,200 cash in the company in exchange for its common stock.
Cash is an asset item, current asset to be specific; while common stock is one of the components of Shareholders' equity. The investment of $16,200 by the owner will therefore increase assets and Shareholders' equity.
Therefore, Assets increase by $16,200; and Shareholders' equity increases by $16,200.
b. The company purchased supplies for $800 cash.
Cash and supplies are both assets item, current assets to be specific. The purchase of supplies will increase the inventory of supplies which is an asset item by $800, while it will reduce cash which is another asset item also by $800.
Therefore, Assets increase by $800; and Assets decrease by $800.
c. The owner invested $10,600 of equipment in the company in exchange for more common stock.
Equipment is an assets item, fixed assets to be specific; while common stock is one of the components of Shareholders' equity. The investment of $10,600 worth of equipment by the owner will therefore increase assets and Shareholders' equity each by $10,600.
Therefore, Assets increase by $10,600; and Shareholders' equity increases by $10,600.
d. The company purchased $260 of additional supplies on credit.
Supplies is an assets item, current assets to be specific; while purchase on credit is a liability item, current liability which is an account payable to creditor of supplies. The purchase of supplies will increase supplies which is an assets item by $260, and it will also increasethe account payables to creditor of supplies.
Therefore, Assets increase by $260; and Liabilities increases by $260.
e. The company purchased land for $9,600 cash.
Cash and land are both assets item, current assets to be specific. The purchase of land will increase the inventory of land which is a fixed asset item by $9,600, while it will reduce cash which is another asset (current asset) item also by $9,600.
Therefore, Assets increase by $9,600; and Assets decrease by $9,600.
