Dorsett Company's tabular analysis at the beginning of May consisted of the following balances: During October the company borrowed an additional $4500 from Trans-Union National Bank and used the funds to purchase additional equipment with a cost of $4000.What would be the combined effect of these two transactions on the tabular analysis?

Question

Dorsett Company's tabular analysis at the beginning of May consisted of the following balances:  During October the company borrowed an additional $4500 from Trans-Union National Bank and used the funds to purchase additional equipment with a cost of $4000.What would be the combined effect of these two transactions on the tabular analysis?

Quizplus · Accepted Answer

The company borrowed $4500 and used the funds to purchase equipment costing $4000, so there will be an increase in cash of $500 ($4500 borrowed - $4000 equipment cost). The purchase of equipment will result in an increase in the equipment account by $4000. Finally, there will be an increase in notes payable of $4500 to reflect the borrowing from Trans-Union National Bank.

Dorsett Company's Tabular Analysis at the Beginning of May Consisted