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Mgmt_200_Spring_2008_solutions_1-14-08(1,16) - Management...

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Management 200 – Introductory Financial Accounting– Spring 2008 Krannert School of Management - Purdue University Solutions to class assignment for January 14, 2008 E2–2. 1. Received Given (a) Equipment (A) [or Computer equipment] Note payable (L) (b) Equipment (A) [or Delivery truck] Cash (A) (c) No exchange transaction (d) Cash (A) Contributed capital (SE) (e) Building (A) [or Construction in progress] Cash (A) (f) Intangibles(A) [or Copyright] Cash (A) (g) Retained earnings (SE) [Received a reduction in the amount available for payment to stockholders] Cash (A) (h) Investments (A) Cash (A) (i) Land (A) Cash (A) (j) Intangibles (A) [or Patents] Cash (A) and Note payable (L) (k) No exchange transaction (l) Cash (A) Short-term note payable (L) (m) Note payable (L) [Received a reduction in its promise to pay] Cash (A) 2. The truck in (b) would be recorded as an asset of $21,000. The land in (i) would be recorded as an asset of $50,000. These are applications of the cost principle. 3. The agreement in (c) involves no exchange or receipt of cash, goods, or services and thus is not a transaction. Since transaction (k) occurs between the owner and others, there is no effect on the business because of the separate-entity assumption.
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E2–4. Assets = Liabilities + Stockholders’ Equity a. Cash +200,000 Contributed capital +200,000 b. Cash +60,000 Notes payable +60,000 c. Land Cash +120,000 –10,000 Mortgage note payable
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