accounting.docx - Chapter 3 BE 8 Exercise 9,10 Problem 2A#8 BE3-8 Tilton Corporation has the following transactions during August of the current year

accounting.docx - Chapter 3 BE 8 Exercise 9,10 Problem 2A#8...

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Chapter 3 BE 8, Exercise 9,10, Problem 2A #8) BE3-8 Tilton Corporation has the following transactions during August of the current year. Indicate (a) the basic analysis and (b) the debit–credit analysis illustrated on pages 111–116. The purpose of transaction analysis is first to identify the type of account involved and then to determine whether a debit or a credit to the account is required. Event 1 On August 1, Tilton Corp. issues shares of common stock to investors in exchange for $10,000. Basic Analysis The asset Cash is increased $10,000; stockholders equity (specifically common stock) is increased $10,000 Debit Credit Analysis Debits increase assets: debit Cash $10,000 Credits increase stockholders’ equity: credit Common Stock $10,000 Event 2 On August 4, Tilton Corp. pays insurance in advance for 3 months for $1,500 Basic Analysis The asset cash is decreased by $1,500. Payments of expenses that will benefit more than one accounting period are identified as prepaid expenses or prepayments. When a payment is made an asset account
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