Olive Enterprises experienced the following events during 2012. 1. Acquired cash

Question

Olive Enterprises experienced the following events during 2012.

1. Acquired cash from the issue of common stock.
2. Paid cash to reduce the principal on a bank note.
3. Sold land for cash at an amount equal to its cost.
4. Provided services to clients for cash.
5. Paid utilities expenses with cash.
6. Paid a cash dividend to the stockholders.

Explain how each of the events would affect the accounting equation by writing the letter I for increase, the letter D for decrease, and NA for does not affect under each of the components of the accounting equation.

Explanation / Answer

Affect on the accounting equation :

I

D

Assets = Liabilities + Stockholder's equity 1. Acquired cash from the issue of common stock. I NA I 2. Paid cash to reduce the principal on a bank note. D D NA 3. Sold land for cash at an amount equal to its cost.

I

D

NA NA 4. Provided services to clients for cash. I NA I 5. Paid utilities expenses with cash. D NA D 6. Paid a cash dividend to the stockholders.
D NA D

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