Dual effects on balance sheet equation, Cement Plus, a firm specializi

QUESTION

Dual effects on balance sheet equation, Cement Plus, a firm specializing in building materials, engaged in the following four transactions during 2008: (1) Purchased and received inventory costing $14,300 million, of which $12,000 million was on account with the rest paid in cash: (2) Purchased a machine for $3,000 million with cash; (3) Issued 2,000 shares of common stock for $6,500 million in cash: (4) Issued shares of common stock to its suppliers for the remaining amount due on purchases of inventor. Indicate the effects of each of these three transactions on the balance sheet equation. Cement Plus applies U.S. GAAP financial reporting standards, and reports its results in millions of dollars.
Inventory will increase the Assets side of Balance Sheet by $ 14,300 and lower the Cash balance by $2,300. On the liabilities side, there will be an increase of $ 12,000 in the Accounts Payable. Both sides of the Balance sheet will increase by $ 12,000. Asset side will increase by $ 3,000 by an asset Machine and Cash will decrease by $ 3,000 in the asset side. Overall effect on Balance Sheet will be Zero. Common Stock on the

iabilities side of the Balance Sheet will increase by $ 6,500 and corresponding effect will be on the Asset side as Cash will also increase by $ 6,500. Accounts Payable will be reduced by $ 12,000 and Common stock will increase by $ 12,000. Overall effect on Balance Sheet will be Zero.

ANSWER:

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