Exercise 2-1 Transaction analysis [LO2-1] whrehlui taactions occurred during Mar

Question

Exercise 2-1 Transaction analysis [LO2-1] whrehlui taactions occurred during March 2018 for the Wainwnight Corporation. The company owns and operates a wholesale 1. Issued 38,000 shares of common stock in exchange for $380.000 in cash. 2. Purchased equipment at a cost of $56,000. $14.000 cash was pald and a note payable was signed for the balance owed. 3. Purchased I nventory on account at a cost of $116,000. The company uses the perpetual Inventory system. 4. Credit sales for the month totaled $160.000. The cost of the goods sold was $96,000 5. Pald $5,250 In rent on the warehouse building for the month of March. to an insurance company for fire and lability Insurance for a one-year period beginning April 1, 2018 7. Pald $96,000 on account for the merchandise purchased in 3. 8. Collected $72,000 from customers on account 9. Recorded depreclation expense of $1,400 for the month on the equipment. Required: Analyze each transaction and show the effect of each on the accounting equation for a corporation. (Amounts to be deducted should be indicated by a minus sign. Enter the net change on the accounting equation.) Assets Liabilities + Paid-In Capital Retained Earnings 2. 10f 10 ¡ Next >

Explanation / Answer

Solution 2-1:

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Event Assets = Liabilities + Paid in capital + Retained Earnings 1 $380,000.00 = $0.00 + $380,000.00 + $0.00 2 $42,000.00 = $42,000.00 + $0.00 + $0.00 3 $116,000.00 = $116,000.00 + $0.00 + $0.00 4 $64,000.00 = $0.00 + $0.00 + $64,000.00 5 -$5,250.00 = $0.00 + $0.00 + -$5,250.00 6 $0.00 = $0.00 + $0.00 + $0.00 7 -$96,000.00 = -$96,000.00 + $0.00 + $0.00 8 $0.00 = $0.00 + $0.00 + $0.00 9 -$1,400.00 = $0.00 + $0.00 + -$1,400.00

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