Question

Early in January, the following transactions were carried out by Maxwell Communications. Sold capital stock to owners for $35,000. Purchased land and a small office building for a total price of $90,000, of which $35,000 was the value of the land and $55,000 was the value of the building. Paid $22,500 in cash and signed a note payable for the remaining $67,500. Bought several computer systems on credit for $9,500 (30-day open account). Obtained a loan from Capital Bank in the amount of $20,000. Signed a note payable. Paid the $22,250 account payable due as of December 31. Required: b. Record the effects of each of the five transactions. (Enter decreases to accounts as a negative.)

Answer 1

Answer:

Part a

                                Assets                     Liabilities               Owners Equity

Balances              $308,250                   $108,250                   $200,000

Part b

Transaction #         Assets                     Liabilities                  Owners Equity

1                       + $35,000 (Cash)                nill                    + $35,000 (Capital)

2                      + $35,000 (Land)        +67,500 (Note Payable)          nill

                       + $55,000(Buildings)

                       - $22,500 (Cash)

3                      + $9,500 (Office Equi)  + $9,500 (Acco Payable)      nill

4                      +$20,000 (Cash)          +$20,000(Note Payable)       nill

5                     - $22,250 (Cash)           -$20,000(Acco Payable)       nill

Explanation:

Hi, I have attached the full question below as images.

Part a

Here simply calculated the totals of Assets, Liabilities and Owners Equity at December 31.

Part b

Remember for every transaction, there are two or more accounts affected. To find the effect of transactions, the first step is to identify the the Accounts affected and the amounts to effect these accounts. Determine if the Account is being increased or decreased. Lastly record the effect as required under the Element of Assets, Liabilities and Equity.