Classifying events as asset source, use, or exchange Vera Company experienced the following events during its first year of operations.

1. Acquired $16,000 cash from the issue of common stock.

2. Paid $3,500 cash for salary expenses.

3. Borrowed $10,000 cash from New South Bank.

4. Paid $6,000 cash to purchase land.

5. Provided boarding services for $10,500 cash.

6. Acquired an additional $1,000 cash from the issue of common stock.

7. Paid $2,400 cash for utilities expense.

8. Paid a $1,500 cash dividend to the stockholders.

9. Provided additional services for $6,000 cash.

10. Purchased additional land for $2,500 cash.

11. The market value of the land was determined to be $24,000 at the end of the accounting period.

Required

Classify each event as an asset source, use, or exchange transaction.

Question

Business

Carla

2 June, 08:06

Classifying events as asset source, use, or exchange Vera Company experienced the following events during its first year of operations.

1. Acquired $16,000 cash from the issue of common stock.

2. Paid $3,500 cash for salary expenses.

3. Borrowed $10,000 cash from New South Bank.

4. Paid $6,000 cash to purchase land.

5. Provided boarding services for $10,500 cash.

6. Acquired an additional $1,000 cash from the issue of common stock.

7. Paid $2,400 cash for utilities expense.

8. Paid a $1,500 cash dividend to the stockholders.

9. Provided additional services for $6,000 cash.

10. Purchased additional land for $2,500 cash.

11. The market value of the land was determined to be $24,000 at the end of the accounting period.

Required

Classify each event as an asset source, use, or exchange transaction.

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Answers (1)

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Dillon Zuniga · Answer 1

Vera Company

1. Acquired $16,000 cash from the issue of common stock. [ Exchange; Cash balance increases while Owners Equity also increases. The net effect is zero ]

2. Paid $3,500 cash for salary expenses [ Asset Use; because we deplete Cash as an asset to pay for an expense item]

3. Borrowed $10,000 cash from New South Bank. [ Exchange. We got cash (an asset) but created a liability through bank loan, net effect is zero]

4. Paid $6,000 cash to purchase land. [ Exchange; depleted Cash (an Asset) to obtain another Asset (Land) net effect is zero]

5. Provided boarding services for $10,500 cash. [ Asset Source; income is driving up our cash balance (an Asset) ]

6. Acquired an additional $1,000 cash from the issue of common stock. [ Exchange; Cash balance increases while Owners Equity also increases. The net effect is zero ]

7. Paid $2,400 cash for utilities expense. [ Asset Use; because we deplete Cash as an asset to pay for an expense item]

8. Paid a $1,500 cash dividend to the stockholders. [ Asset Use; because we deplete Cash as an asset to pay for dividend to shareholders]

9. Provided additional services for $6,000 cash. [ Asset Source; income is driving up our cash balance (an Asset) ]

10. Purchased additional land for $2,500 cash. [ Exchange; depleted Cash (an Asset) to obtain another Asset (Land) net effect is zero]

11. The market value of the land was determined to be $24,000 at the end of the accounting period. : [ Asset Source; improvement in fair valuation of Asset]