Fundamentals of Financial Accounting 4th Edition by Fred Phillips,Robert Libby,Patricia Libby

Exercise 43

Analyzing the Effects of Transactions in T-Accounts
Mulkeen Service Company, Inc. was incorporated by Conor Mulkeen and five other managers. The following activities occurred during the year:
a. Received $60,000 cash from the managers; each was issued 1,000 shares of common stock.
b. Purchased equipment for use in the business at a cost of $12,000; one-fourth was paid in cash and the company signed a note for the balance (due in six months).
c. Signed an agreement with a cleaning service to pay it $120 per week for cleaning the corporate offices, beginning next year.
d. Conor Mulkeen borrowed $10,000 for personal use from a local bank, signing a one-year note.
Required:
1. Create T-accounts for the following accounts: Cash, Equipment, Note Payable, and Common Stock. Beginning balances are zero. For each of the above transactions, record its effects in the appropriate T-accounts. Include referencing and totals for each T-account.
2. Using the balances in the T-accounts, fill in the following amounts for the accounting equation:
Assets $ ______ = Liabilities $ ______ + Stockholders' Equity $ ______
3. Explain your response to events ( c) and ( d).