Explanation Accounting event: An accounting event is a cost-effective event that affects assets, liabilities, or stockholders’ equity of a Company. Classification of each event as an asset source, asset use or exchange transaction or not applicable (NA) is as follows : Event Classification 1 Asset Source 2 Asset Source 3 Asset Exchange 4 Asset Source 5 Asset Source 6 Asset Exchange 7 Asset Use 8 NA 9 Asset Use 10 Asset Use 11 NA Table (1) 1. Acquired $20,000 cash from the issue of common stock: This event is represented as an asset source transaction because this transaction provided $20,000 of assets (cash) to the business. It increases the asset (cash) value and its stockholders’ equity (common stock). 2. Borrowed $12,000 cash from Bank F: Asset source transaction increases the total assets and total claims of the company. Therefore, borrowed cash from bank is an asset source transaction as it increases the asset account of cash and liabilities (note payable) by $12,000. 3. Paid $5,000 cash to purchase land. In this event, the company traded cash for land. The cash amount is decreased by $5,000 and the land is increased by the same amount. It is an Asset exchange transaction since, it affected only the composition of the assets and the total amount of assets remain unaffected. 4. Received $25,000 cash for providing boarding services: Rendering services is an economic benefit to the Company for which it earns revenue and it is considered as an Asset source transaction as the increase in the asset account cash is balanced by an increase in the equity account revenue for amount of $25,000...

Fundamental Financial Accounting Concepts

10th Edition

ISBN: 9781260159028

Author: Edmonds

Publisher: MCG

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Chapter 1, Problem 13BE

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Classify each event as an asset source, asset use or exchange transaction or not applicable

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Chapter 1, Problem 12BE

Chapter 1, Problem 14BE

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Fundamental Financial Accounting Concepts

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