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Chapter 2 Investing and Financing Decisionsand the Balance Sheet
Group 3 Problem E2-7

Recording Investing and Financing Activities
For each of the events in E2-5, prepare journal entries, checking that debits equal credits.

Explain your response to Event (d)
Given:
a) Purchased $216.3 in property,plant, and equipment; paid by signing a $5 long-term note and the rest in cash
b) Issued $21.1 in additional stock for cash.
c) Declared $100 in dividends; paid $78.8 during the year and owed the rest to be paid in the following year.
d) Several Nike investors sold their stock to other investors on the stock exchange for $21.
e) Sold $1.4 in investments in other companies for $1.4 cash.
1) Journal entry:

Debit Credit
a) Land, plant, and equipment(+A) 216.3
Cash(-A) 5
Note Payable(+L) 211.3
216.3 = 5 + 211.3 accounting equation is in balance

b) Cash(+A) 21.1
Contributed Capital(+SE) 21.1
21.1 = 21.1 accounting equation is in balance



Debit Credit
c) Dividends Payable(-SE) 100
Retained Earning(+L) 78.8
Long-term Note Payable(+L) 21.2
100 = 78.8 + 21.2 accounting equation is in balance

d) Not an account transaction; have no reflect on the company. No account are affected.

e) Cash(+A) 1.4
Investment(-A) 1.4
1.4= 1.4 accounting equation is in balance.
1.5


2) Explain your response to Event (d):
The transaction of stock between company’s investors and other have no affect on the company and so no account are effected.