Question

Analysis of Mueller Company's accounts show that as a result of a single transaction, both cash and notes payable increased by $10,000. Which of the following transactions would have caused this increase?

1. Issuing common stock for cash.2. Borrowing cash and signing a promissory note.3. Purchasing equipment and signing a promissory note.4. Collecting cash from a customer

Answer 1

2. Borrowing cash and signing a promissory note.

Step-by-step explanation:

The given transactions journal entries are as follows:

1. Cash A/c Dr XXXXX

To Common Stock A/c XXXXX

(Being the issuance of the common stock is recorded)

2. Cash A/c Dr XXXXX

To Notes payable A/c XXXXX

(Being the cash borrowed is recorded)

3. Equipment A/c Dr XXXXX

To Note payable A/c XXXXX

(being the equipment is purchased)

4. Cash A/c Dr XXXXX

To Account receivable A/c XXXXX

(Being the cash is collected)