Grizzly Co.enters into the Following Transactions

question 154

Essay

Grizzly Co.enters into the following transactions:
Stockholders contribute $25,000 cash to a company in exchange for common stock.
The company purchases $12,500 of new equipment in exchange for its promise to pay $12,500 at the end of next month.
The company pays $7,500 to suppliers on account.
Required:
Part a.Show the effect of these transactions on the basic accounting equation.
Part b.Prepare the journal entries that would be used to record the transactions.

---

Definitions:

Internal Control

The processes and procedures implemented by a company to ensure the integrity of financial and accounting information, promote accountability, and prevent fraud.

Cash

A company's money in the form of currency or in bank accounts that is immediately available for business use.

FOB Destination

A shipping term indicating that the seller bears the shipping costs and retains ownership of the goods until they are delivered to the buyer's location.

Revenue Recognition

The accounting principle dictating the specific conditions under which revenue is recognized or accounted for.