Mulkeen Service Company, Inc. was incorporated by Conor Mulkeen and five other managers. The following activities occurred during the year:
a. Received $ 60,000 cash from the managers; each was issued 1,000 shares of common stock.
b. Purchased equipment for use in the business at a cost of $ 12,000; one- fourth was paid in cash and the company signed a note for the balance (due in six months).
c. Signed an agreement with a cleaning service to pay it $ 120 per week for cleaning the corporate offices, beginning next year.
d. Conor Mulkeen borrowed $ 10,000 for personal use from a local bank, signing a one- year note.
Required:
1. Create T- accounts for the following accounts: Cash, Equipment, Note Payable, and Common Stock. Beginning balances are zero. For each of the above transactions, record its effects in the appropriate T- accounts. Include referencing and totals for each T- account.
2. Using the balances in the T- accounts, fill in the following amounts for the accounting equation: Assets $______ = Liabilities $______ + Stockholders’ Equity $______
3. Explain your response to events (c) and (d).