Question

The following events occurred for Johnson Company: a. Received investment of $39,000 cash by organizers and distributed 1,190 shares of $1 par value common stock to them.b. Purchased $7,100 of equipment, paying $1,300 in cash and signing a note for the rest.c. Borrowed $15,000 cash from a bank.

Answer 1

Cash 39.000 debit

Common Stock 1,190 credit

Additional Paid-in 37,810 credit

Equipment 7,100 debit

Cash 1,300 credit

Note payable 5,800 credit

Cash 15,000 debit

Note payable 15,000 credit

Step-by-step explanation:

We debit the cash received and credit the face value of the common stock

the difference is label as additional paid-in common stock which, is also credited.

as the equipment is worth 7,100 and we paid 1,300 cash the differnece: 7,100 - 1,300 = 5,800 is the principal of the note signed

As the equipment which enters the firm is an asset it wil lbe debited.

the cash is being used thus, credited and the note is a liability hence credit as well

the third event consist of a inflow of cash thus debit and taking a liability therefore, credit.