Recording Investing and Financing Activities Refer to E2-5. Determining Financial Statement Effects of Several Transactions The following

Question:

Recording Investing and Financing Activities Refer to E2-5.

Determining Financial Statement Effects of Several Transactions The following events occurred for Favata Company:

a. Received investment of $\$ 20,000$ cash by organizers.

b. Borrowed cash from a bank and signed a note for $\$ 6,000$.

c. Purchased $\$ 12,000$ in land; paid $\$ 1,000$ in cash and signed a mortgage note with a local bank for the balance (due in 15 years).

d. Loaned $\$ 300$ to an employee who signed a note due in three months.

e. Paid the bank the amount borrowed in $(b)$.

f. Purchased $\$ 8,000$ of equipment, paying $\$ 1,000$ in cash and signing a note due to the manufacturer.
Required:
For each of the events $(a)$ through $(f)$, perform transaction analysis and indicate the account, amount, and direction of the effects (+ for increase and - for decrease) on the accounting equation. Check that the accounting equation remains in balance after each transaction. Use the following headings:
Event Assets $=$ $ \qquad $
+ Shareholders' Equity Required:
For each of the events in E2-5, prepare journal entries, checking that debits equal credits.
Determining Financial Statement Effects of Several Transactions The following events occurred for Favata Company:

a. Received investment of $\$ 20,000$ cash by organizers.

b. Borrowed cash from a bank and signed a note for $\$ 6,000$.

c. Purchased $\$ 12,000$ in land; paid $\$ 1,000$ in cash and signed a mortgage note with a local bank for the balance (due in 15 years).

d. Loaned $\$ 300$ to an employee who signed a note due in three months.

e. Paid the bank the amount borrowed in $(b)$.

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