Question

:Create the following table similar to the one in Exhibit 1.9. Assets = Liabilities + Equity Cash + Supplies + Equipment + Land = Accounts + Common − Dividends + Revenues − Expenses Payable Stock

Then use additions and subtractions to show the dollar effects of each transaction on individual items of the accounting equation.

a. The owner invested \(15,000 cash in the company in exchange for its common stock.

b. The company purchased supplies for \)500 cash.

c. The owner invested \(10,000 of equipment in the company in exchange for more common stock.

d. The company purchased \)200 of additional supplies on credit.

e. The company purchased land for $9,000 cash.

Short answer

Common stocks are stocks that come with voting rights, and the accounting equation is prepared in ‘step 2’.

Step-by-step solution

Definition of common stock

Common stocks are defined as the smallest units into which the capital of the company is divided, which come with voting rights.

Accounting equation table

	Assets				=	Liabilities	+	Equity
	Cash	Supplies	Equipment	Land		AP		Common stock	Dividends	Revenues	Expenses
A	15,000							15,000
B	-500	500
C			10,000					10,000
D		200				200
E	-9000			9000