Transaction Analysis Torrey Mann began the Mann Word Processing Service in Decem

Question

Transaction Analysis Torrey Mann began the Mann Word Processing Service in December 2015. The firm provides word-processing services for businesses and is currently operating with leased equipment On January 1, 2016, the assets and liabilities of the business were: Cash Accounts Receivable 9,600 Accounts Payable ,600 Notes Payable Common Stock Retained Earnings $7,100 4,200 10,900 The following transactions occurred during the month of January: Jan 1 Paid rent on office and equipment for January, $1,600. 2 Collected $7,200 on account from clients. Borrowed $5,700 from a bank and signed a note payable for that amount. 4 Billed clients for work performed on account, $9,200. 5 Paid $1,100 on accounts payable. 6 Received invoice for January advertising, $1,450 7 Paid January salaries, $5,500. 8 Paid January utilities, $930 9 Paid stockholders a dividend in the amount of $3,300 10 Purchased fax machine (on January 31) for business use, $2,100 11 Paid $170 to bank as January interest on the outstanding note payable.

Explanation / Answer

ASSETS                = LIABILITIES Cash+ Accounts Receivables+ Equipment= Accounts Payable+ Notes Payable+ Common Stock+ Retained Earnings Effect on Balance 7100 9600 1600 4200 10900 1-Jan -1600 -1600 Assets Reduces cash Liabilities Expense--Income statement a/c --reduces retained earnings 2 7200 -7200 Assets Increases cash Assets Reduces Accounts receivables 3 5700 5700 Assets Increases cash Liabilities Increases Accounts payables 4 9200 9200 Assets Increases Accounts Receivables Liabilities Sales--Income statement a/c--Increases Retained earnings 5 -1100 -1100 Assets Decreases cash Liabilities Decreases Accounts payable 6 1450 -1450 Liabilities Increase Accounts payable Liabilities Expense--Income statement a/c --reduces retained earnings 7 -5500 -5500 Assets Decreases cash Liabilities Expense--Income statement a/c --reduces retained earnings 8 -930 -930 Assets Decreases cash Liabilities Expense--Income statement a/c --reduces retained earnings 9 -3300 -3300 Assets Decreases cash Liabilities reduces Retained earnings 10 2100 2100 Assets Increases Equipment Liabilities Increases Accounts payable 11 -170 -170 Assets Decreases cash Liabilities Int. Expense--Income statement a/c --reduces retained earnings Total 7400 11600 2100 9750 4200 10900 -3750 21100 21100

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