Question

During 2014, Comstock Company entered into the following transactions.

1. Purchased equipment for $286,176 cash.
2. Issued common stock to investors for $137,590 cash.
3. Purchased inventory of $68,480 on account.
Using the following tabular analysis, show the effect of each transaction on the accounting equation. Put explanations for changes to Stockholders' Equity in the right-hand margin. For Retained Earnings, use separate columns for Revenues, Expenses, and Dividends if necessary. Use Illustration3-3 as a model.

Answer 1

1.

Assets : Increase $286,176, Decrease $286,176

Liabilities : No Effect

Equity : No Effect

2.

Assets : Increase $137,590

Liabilities : No Effect

Equity : Increase $137,590

3.

Assets : Increase $68,480

Liabilities : Increase $68,480

Equity : No Effect

Step-by-step explanation:

Purchase of equipment

This will increase the assets of Equipment and decrease the Assets of Cash. No effect on the other elements of the Accounting Equation.

Issuance of common stock

This will increase the assets of cash and increase the shareholder`s equity. No effect on liabilities

Purchased inventory on Account.

This will Increase the assets of inventory and also increase the assets of Accounts Payable. No effect on Equity