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E$2-8($Algo$)$ Analyzing the Effects of Transactions in T$-$Accounts $[$LO $2-2,$ LO $2-3,$ LO $2-5]$

$[$The following information applies to the questions displayed below.$]$

Mulkeen Service Company, Incorporated, was incorporated by Conor Mulkeen and five other managers. The following

activities occurred during the year:

a$.$ Received $$44,000$ cash from the managers; each was issued $1,200$ shares of common stock.

b$.$ Purchased equipment for use in the business at a cost of $$7,200$; one$-$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 $$60$ per week for cleaning the corporate offices, beginning next

year.

d$.$ Conor Mulkeen borrowed $$13,000$ for personal use from a local bank, signing a one$-$year note.

E$2-8($Algo$)$ Part $3$

$3-$a$.$ What will be your response to transaction $($c$)?$

The agreement in $($c$)$ involves no exchange or receipt of cash, goods, or services and thus is not yet a transaction.

The agreement in $($c$)$ involves exchange of cash and services and thus is a transaction.

$3-$b$.$ What will be your response to transaction $($d$)?$

Transaction $(d)$ occurs between the company and others, so this transaction affect the business.

Transaction $(d)$ occurs between the owners and others, the separate entity assumption implies this transaction does not affect

the business.