Harrigan Service Company, Inc., was incorporated by Ian Harrigan and five other managers. The following activities occurred during the year:

a. Received $60,000 cash from the managers; each was issued 1,000 shares.

b. Purchased equipment for use in the business at a cost of $12,000; one-fourth was paid in cash and the company signed a note for the balance (due in six months). c. Signed an agreement with a cleaning service to pay it $120 per week for cleaning the corporate offices, beginning next week.

d. Ian Harrigan borrowed $10,000 for personal use from a local bank, signing a one-year note.

Required:

1. Create T-accounts for the following accounts: Cash, Equipment, Note Payable, and Contributed Capital. Beginning balances are zero. For each of the above transactions, record its effects in the appropriate T-accounts. Include referencing and totals for each T-account.

2. Using the balances in the T-accounts, fill in the following amounts for the accounting equation:

Assets $____________= Liabilities $$_____________+ Shareholders' Equity $$____________

3. Explain your response to events (c) and (d).