Question

Olive Enterprises experienced the following events during 2012.

1. Acquired cash from the issue of common stock.
2. Paid cash to reduce the principal on a bank note.
3. Sold land for cash at an amount equal to its cost.
4. Provided services to clients for cash.
5. Paid utilities expenses with cash.
6. Paid a cash dividend to the stockholders.

Explain how each of the events would affect the accounting equation by writing the letter I for increase, the letter D for decrease, and NA for does not affect under each of the components of the accounting equation.

Answer 1

Answer:

1. Cash - Assets (I) & Common Stock - Liabilities (I)

2. Cash -Assets (D) & Bank Note - Liabilities (D)

3. Land - Assets (D) & Cash - Assets (I)

4. Services revenue - Revenue (I) & Cash - Assets (I)

5. Cash- Assets (D) & Utilities expense-Expenses (I)

6. Cash- Assets (D) & Retained utilities-Owner's Equity (D)