Please Show your work! Chapter 2 in-class exercises ALE Exercise The following t
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Please Show your work!
Chapter 2 in-class exercises ALE Exercise The following transactions occurred during March year 1 for the Plare Corporation. The company owns and operates a wholesale warehouse 1. Issued 32,500 shares of common stock in exchange for $325,000 in cash 2. Purchased equipment at a cost of $36,000. $12,100 cash was paid and a note payable was signed for the balance owed 3. Purchased inventory on account at a cost of $97,000. The company uses the perpetual system inventory 4. Credit sales for the month totaled $150,000. The cost of the goods sold was $75,445 5. Paid $4,400 in rent on the warehouse building for the month of March 6. Paid $5,100 to an insurance company for fire and liability nsurance for a one year perñiod -year period beginning April 1, year 1. 7. Paid $75,000 on account for the merchandise purchased in 3. 8. Collected $68,750 from customers on account. 9. Recorded depreciation expense of $1,100 for the month on the equipment. Requirea: 1) Analyze each transaction and show the effect of each on the accounting equation for a corporation. 2) Prepare journal entries to record each of the transactions above.Explanation / Answer
Answer 1 Answer 2 Effect of transaction of accounting equation Journal entries Transaction Total Assets = Liabilities + Equity Sr.No. Account Titles Debit Credit 1 $325,000.00 = + $325,000.00 1 Cash $325,000.00 2 $36,000.00 = + Common stock $325,000.00 -$12,100.00 $23,900.00 3 $97,000.00 = $97,000.00 + 2 Equipment $36,000.00 4 $150,000.00 = + $150,000.00 Cash $12,100.00 -$75,445.00 -$75,445.00 Note Payable $23,900.00 5 -$4,400.00 = + -$4,400.00 6 $5,100.00 = + 3 Inventory $97,000.00 -$5,100.00 Accounts Payable $97,000.00 7 -$75,000.00 = -$75,000.00 + 8 $68,750.00 = + 4 Accounts Receivables $150,000.00 -$68,750.00 Sales $150,000.00 9 -$1,100.00 = + -$1,100.00 Cost of goods sold $75,445.00 Positive amount indicates increase whereas negative amount indicates decrease. Inventory $75,445.00 5 Rent Expense $4,400.00 Cash $4,400.00 6 Prepaid Insurance $5,100.00 Cash $5,100.00 7 Accounts Payable $75,000.00 Cash $75,000.00 8 Cash $68,750.00 Accounts Receivables $68,750.00 9 Depreciation Expense $1,100.00 Accumulated Depreciation - Equipment $1,100.00
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