Dual effects on balance sheet equation and journal entries.
Assume that during 2008, a U.S. retailer, engages in the following six transactions.
Bullseye Corporation applies U.S. GAAP, and reports its results in millions of U.S. dollars.
1.The firm issues 20 million shares of $0.0833 per value common stock for a total of $960 million cash.
2. It purchases merchandise costing $1500 million on account.
3. The firm acquires a new store location, consisting of a building costing $3200 million and land costing $930 million. It pays cash to the owner of the property.
4. The firm purchases fixtures for the new store costing $860 million on account.
5. The firm pays the merchandise supplier in transaction (2) the amount due.
6. The firm pays the supplier of the fixtures in transaction (4) half of the amount due in cash. The firm pays the other half by issuing 8.6 million common shares to the supplier. At the time of this transaction, Bullseye Corporation shares traded at $50 per share in the market.
a. Indicate the effects of these six transactions on the balance sheet equation using this format:
Transaction Number Assets = Liabilities + Shareholders Equity
(1) +$960 $0 +$960
Subtotal $960 = $0 + $960
b. Give the journal entries for each of the six transactions.