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Unformatted text preview: Chapter 02 E2–2. Req. 1 Received Given (a) Cash (A) Contributed capital (SE) (b) Equipment (A) [or Delivery truck] Cash (A) (c) No exchange transaction — (d) Equipment (A) [or Computer equipment] Note payable (L) (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) Land (A) Cash (A) (i) Intangibles (A) [or Patents] Cash (A) and Note payable (L) (j) No exchange transaction — (k) Investments (A) Cash (A) (l) Cash (A) Short-term note payable (L) (m) Note payable (L) [Received a reduction in its promise to pay] Cash (A) Req. 2 The truck in (b) would be recorded as an asset of $18,000. The land in (h) would be recorded as an asset of $50,000. These are applications of the historical cost principle. Req. 3 The agreement in (c) involves no exchange or receipt of cash, goods, or services and thus is not a transaction. Since transaction (j) occurs between the owner and others, there is no effect on the business because of the separate-entity assumption. E2–3. Account Balance Sheet Categorization Debit or Credit Balance (1) Accounts Receivable CA Debit (2) Retained Earnings SE Credit (3) Taxes Payable CL Credit (4) Prepaid Expenses CA Debit (5) Contributed Capital SE Credit (6) Long-Term Investments NCA Debit (7) Plant, Property, and Equipment NCA Debit (8) Accounts Payable CL Credit (9) Short-Term Investments CA Debit (10) Long-Term Debt NCL Credit E2–8....
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This note was uploaded on 03/07/2012 for the course ACCT 225 taught by Professor Canace during the Spring '08 term at South Carolina.
- Spring '08