Chapter 2, Problem 2.6E

(a)

To determine

Journal Entry

A journal entry refers to the recording of a transaction into accounting journal items. The journal entry consists of different recordings, each of which is a debit or credit. The first step in the accounting process is analyzing the transactions and recording them as journal entries.

Procedure for debiting and crediting an account:

• Increase in assets account, decrease in stockholders’ equity account, and decrease in liabilities account should be debited.
• Decrease in assets account, increase in stockholders’ equity account, and increase in liabilities account should be credited.

All transactions affect the accounting equation that is displayed below. The accounting equation should always remain in balance at the time of recording a business transaction:

$\boxed{\text{Asset = Liabilities + Stockholders' equity}}$

(b)

To determine

To prepare: The journal entries for the given transaction.