Question

Mulkeen Service Company, Inc was incorporated by Conor Mulkeen and five other managers. The following activities occurred during the year a. Received $72.000 cash from the managers; each was issued 2,000 shares of common stock b. Purchased equipment for use in the business at a cost of $15.600; one-fourth was paid in cash and the company signed a note for the balance (due in six months). c. Signed an egreement with a cleaning service to pay it $130 per week for cleaning the corporate offices, d. Conor Mulkeen borrowed $27000 for personal use from o local bank, signing a one-year note. beginning next yeor value 1.00 points Required 1. For each of the above transactions, record its effects in the appropriate T-accounts. Assume al beginning balances are zero. Cash Equipment Beg. Bal. Beg Bal End. Bal. End. Ba. Note Payable Common Stock Beg. Bal Beg. Bal End. Bal End Ba

Answer 1

Answer 1:

Answer 2:

Workings:

Assets = Cash balance + Equipment balance = $68,100 + $15,600 =$83,700

Liabilities = Notes payable = $11, 700

Stockholders' Equity = Common stock = $72,000

$83,700 = $11,700 + $72,000

Answer 3(a):

Correct answer is:

The agreement in (c) in involves no exchange or receipt of cash, goods or services and thus not yet a transaction.

Explanation:

This involves signing of agreement which will be effective beginning next year. This as such is not a transaction for recording in accounts of current year.

Answer 3(b):

Correct answer is:

Transaction (d) occurs between owners and others, the separate entity assumption implies this transaction does affect the business.

Explanation:

This transaction is between owner and bank with owner taking a personal loan from bank. As such it does not involve the company which is a separate entity from owner.