Chapter 2, Problem 2.3E

Analyze the Impact of transactions on the accounting equation (LO2–2)

Green Wave Company plans to own and operate a storage rental facility. For the first month of operations, the company had the following transactions.

  1.    Issue 10,000 shares of common stock in exchange for $32,000 in cash.

  2.    Purchase land for $19,000. A note payable is signed for the full amount.

  3.    Purchase storage container equipment for $8,000 cash.

  4.    Hire three employees for $2,000 per month.

  5.    Receive cash of $12,000 in rental fees for the current month.

  6.    Purchase office supplies for $2,000 on account.

  7.    Pay employees $6,000 for the first month’s salaries.

Required:

For each transaction, describe the dual effect on the accounting equation. For example, in the first transaction, (1) assets increase and (2) stockholders’ equity increases.