Question

Victor Cruz contributed $70,000 in cash and land worth $130,000 to open a new business, VC Consulting, in exchange for common stock. Which of the following general journal entries will VC Consulting make to record this transaction? Multiple Choice Debit Accounts Payable $200,000; Credit Common Stock, $200,000. Credit Cash and Land, $200,000; Credit Common Stock, $200,000. Debit Cash $70,000; Debit Land $130,000; Credit Common Stock, $200,000. Debit Common Stock, $200,000; Credit Cash $70,000, Credit Land, $130,000. Debit Common Stock, $200,000; Credit Assets, $200,000.

Answer 1

Answer:

Debit Cash $70,000; Debit Land $130,000; Credit Common Stock, $200,000

Explanation:

The owner's equity represents the amount provided by the owners of a business. At commencement, the owners may decide to introduce money into the business or shares or even assets.

Any of these will be recognized as the shareholder's equity at the start of the business.

As such, when cash is introduced, the entries to be recorded are between cash and common stock. When an asset is introduced, the worth is recorded as common stock.