Journal Entries: Business Formation Example Video Lessons

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Problem: Indicate the effect each of the following transactions has on the accounting equation (i.e., assets, liabilities, and equity). 1. ABC Company performed $2,000 of delivery services for a customer who agreed to pay next month. 2. ABC Company sold common stock to investors for $40,000 cash and borrowed $20,000 from the First Bank. 3. ABC Company paid $2,000 cash to the bank; $1,800 of this amount was the repayment of a bank loan and the other $200 paid was interest.

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Problem Details

Indicate the effect each of the following transactions has on the accounting equation (i.e., assets, liabilities, and equity).

1. ABC Company performed $2,000 of delivery services for a customer who agreed to pay next month.

2. ABC Company sold common stock to investors for $40,000 cash and borrowed $20,000 from the First Bank.

3. ABC Company paid $2,000 cash to the bank; $1,800 of this amount was the repayment of a bank loan and the other $200 paid was interest.

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Based on our data, we think this problem is relevant for Professor Reinking's class at UCF.