The following events occurred for Johnson Company:

(a) Received investment of cash by organizers and distributed to them 1,080 shares of $1 par value common stock with a market price of $10 per share.

(b) Purchased $7,900 of equipment, paying $1,100 in cash and owing the rest on accounts payable to the manufacturer. Borrowed $13,000 cash from a bank.

(c) Loaned $500 to an employee who signed a note. Purchased $20,437 of land; paid $8,000 in cash and signed a mortgage note for the balance.

Required:

For each of the events (a) through (e), perform transaction analysis and indicate the account, amount, and direction of the effect (increase or decrease) on the accounting equation.

see explanation below for a walk through to the answer.

Explanation:

(a) Received investment of cash by organizers and distributed to them 1,080 shares of $1 par value common stock with a market price of $10 per share.

(b) Purchased $7,900 of equipment, paying $1,100 in cash and owing the rest on accounts payable to the manufacturer. Borrowed $13,000 cash from a bank.

(c) Loaned $500 to an employee who signed a note. Purchased $20,437 of land; paid $8,000 in cash and signed a mortgage note for the balance.

Required:

Assets = Liabilities + Stockholders' Equity

a. Cash 10800 Common Stock 1080

Additional paid in capital

9720

b. Equipment 7,900 Notes Payable 6,800

Cash - 1100

c. Cash 13,000 Notes Payable 13,000

d. Note receivable 500

Cash - 500

e. Land 20,437 Mortgage Notes Payable 12,437

Cash - 8,000

Accounting Equation

Assets = Equity + Liabilities

(a) Cash + 10,080 Common Shares 10,080 NE

(b) Equipment + 7,900 NE Account Payable + 6,800

Cash - 1,100

Cash + 13,000 Bank loan + 13,000

(c) Cash - 500 NE Mortgage Payable + 12,437

Receivable + 500

Land + 20,437

Cash - 8,000

Total 42,317 10,080 32,237