Shania Shelton, the owner, invested $105,000 cash, office equipment with a value of $6,000 and $45,000 of drafting equipment to launch the business in exchange for its common stock. Which journal entry would this be?
$10,000 deposit in exchange for $10,000 worth of common stock
To record the owner's investment in cash, office equipment, and drafting equipment in exchange for common stock, the following journal entry would be made:
Date Account Debit Credit
Cash $105,000
Office Equipment $ 6,000
Drafting Equipment $45,000
Common Stock $156,000
Explanation:
In this transaction, the owner, Shania Shelton, is investing cash, office equipment, and drafting equipment into the business in exchange for common stock. The cash account is debited with $105,000 to reflect the increase in cash, while the office equipment account is debited with $6,000 to indicate the increase in the value of office equipment. Additionally, the drafting equipment account is debited with $45,000 to represent the increase in the value of drafting equipment. On the other side, the common stock account is credited with $156,000, which represents the total value of the owner's investment in the business.
It is important to note that the total value of the owner's investment is calculated by adding up the cash investment ($105,000), the value of office equipment ($6,000), and the value of drafting equipment ($45,000). In this case, the total investment is $156,000, which is credited to the common stock account.