The following unrelated events are typical of those experienced by business enti
ID: 2589975 • Letter: T
Question
The following unrelated events are typical of those experienced by business entities:
1.Acquire cash by issuing common stock.
2.Pay cash for operating expenses.
3.Agree to represent a client in an IRS audit and to receive payment when the audit is complete.
4.Receive cash for services that have been performed.
5.Pay employees salary with cash.
6.Pay back a bank loan with cash.
7.Pay interest on the bank loan with cash.
8.Transfer cash from a checking account to a money market account.
9.Sell land for cash at its original cost.
10.Pay a cash dividend to stockholders.
11.Learned that a financial analyst determined the company's price-earnings ratio to be 26.
12.Borrow cash from a bank.
13.Pay office supplies expense.
14.Make plans to purchase office equipment at a future date.
15.Trade a used car for a computer with the same value.
Required
Identify each of the events as an asset source, use, or exchange transaction. Indicate for each event whether total assets would increase, decrease, remain unchanged (No effect), or will not applicable (NA). Organize your answer according to the following table. The first event is shown in the table as an example.
Effect on Total Assets EventsT ype of Event 1 Asset source 2. 3. Increase 10 12. 13 14. 15Explanation / Answer
Events Type of events Effect on Total Asset 1 Asset Source Increase 2 Asset Use Decrease 3 NA NA 4 Asset Source Increase 5 Asset Use Decrease 6 Asset Use Decrease 7 Asset Use Decrease 8 Asset Exchange No Effect 9 Asset Exchange No Effect 10 Asset Use Decrease 11 NA NA 12 Asset Source Increase 13 Asset Use Decrease 14 NA NA 15 Asset Exchange No Effect
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