2. Financial Accounting, Seventh Edition3
THE ACCOUNTING INFORMATION SYSTEM
Financial Accounting, Seventh Edition

3. Accounting Transactions
Event (1). On October 1, cash of $10,000 is invested in Sierra Corporation by investors in exchange for $10,000 of common stock.
1. +10, ,000
LO 1 Analyze the effect of business transactions on the basic accounting equation.

4. Accounting Transactions
Event (2). On October 1, Sierra borrowed $5,000 from Castle Bank by signing a 3-month, 12%, $5,000 note payable.
1. +10, ,000
2. +5,000 +5,000
LO 1 Analyze the effect of business transactions on the basic accounting equation.

5. Accounting Transactions
Event (3). On October 2, Sierra purchased equipment by paying $5,000 cash to Superior Equipment Sales Co.
1. +10, ,000
2. +5,000 +5,000
3. -5,000 +5,000
LO 1 Analyze the effect of business transactions on the basic accounting equation.

6. Accounting Transactions
Event (4). On October 2, Sierra received a $1,200 cash advance from R. Knox, a client.
1. +10, ,000
2. +5,000 +5,000
3. -5,000 +5,000
4. +1,200 +1,200
LO 1 Analyze the effect of business transactions on the basic accounting equation.

7. Accounting Transactions
Event (5). On October 3, Sierra received $10,000 in cash from Copa Company for guide services performed.
1. +10, ,000
2. +5,000 +5,000
3. -5,000 +5,000
4. +1,200 +1,200
5. +10, ,000
LO 1 Analyze the effect of business transactions on the basic accounting equation.

8. Accounting Transactions
Event (6). On October 3, Sierra Corporation paid its office rent for the month of October in cash, $900.
1. +10, ,000
2. +5,000 +5,000
3. -5,000 +5,000
4. +1,200 +1,200
5. +10, ,000
LO 1 Analyze the effect of business transactions on the basic accounting equation.

9. Accounting Transactions
Event (7). On October 4, Sierra paid $600 for a one-year insurance policy that will expire next year on September 30.
1. +10, ,000
2. +5,000 +5,000
3. -5,000 +5,000
4. +1,200 +1,200
5. +10, ,000
LO 1 Analyze the effect of business transactions on the basic accounting equation.

10. Accounting Transactions
Event (8). On October 5, Sierra purchased an estimated three months of supplies on account from Aero Supply for $2,500.
1. +10, ,000
2. +5,000 +5,000
3. -5,000 +5,000
4. +1,200 +1,200
5. +10, ,000
8. +2,500 +2,500
LO 1 Analyze the effect of business transactions on the basic accounting equation.

11. Accounting Transactions
Event (9). On October 9, Sierra hired four new employees to begin work on October 15.
1. +10, ,000
2. +5,000 +5,000
3. -5,000 +5,000
4. +1,200 +1,200
5. +10, ,000
8. +2,500 +2,500
An accounting transaction has not occurred.
LO 1 Analyze the effect of business transactions on the basic accounting equation.

12. Accounting Transactions
Event (10). On October 20, Sierra paid a $500 dividend.
1. +10, ,000
2. +5,000 +5,000
3. -5,000 +5,000
4. +1,200 +1,200
5. +10, ,000
8. +2,500 +2,500
LO 1 Analyze the effect of business transactions on the basic accounting equation.

13. Accounting Transactions
Event (11). Employees have worked two weeks, earning $4,000 in salaries, which were paid on October 26.
1. +10, ,000
2. +5,000 +5,000
3. -5,000 +5,000
4. +1,200 +1,200
5. +10, ,000
8. +2,500 +2,500
11. -4,000 -4,000

14. The Trial Balance
Illustration 3-34
Equal
LO 8

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