Chapter 2, Problem 8E

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:

1. a. Received $60,000 cash from the managers; each was issued 1.000 shares of common slock.
2. 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).
3. c. Signed an agreement with a cleaning service to pay it $120 per week for cleaning the corporate offices, beginning next year.
4. d. Conor Mulkeen borrowed $10,000 for personal use from a local bank, signing a one-year note.

Required:

1. 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. 2. Using the balances in the T-accounts, fill in the following amounts for the accounting equation: Assets $ __________ = Liabilities $ __________ + Stockholders’ Equity $ __________
3. 3. Explain your response to events (c) and (d).