The following transactions occurred during March 2016 for the Wainwright Corpora

Question

The following transactions occurred during March 2016 for the Wainwright Corporation. The company owns and operates a wholesale warehouse.

Purchased equipment at a cost of $58,000. $19,000 cash was paid and a note payable was signed for the balance owed.

Purchased inventory on account at a cost of $108,000. The company uses the perpetual inventory system.

Credit sales for the month totaled $129,000. The cost of the goods sold was $79,000.

Paid $6,900 to an insurance company for fire and liability insurance for a one-year period beginning April 1, 2016.

Analyze each transaction and classify each as a financing, investing, and/or operating activity (a transaction can represent more than one type of activity). In doing so, also indicate the cash effect of each. (Amounts to be deducted should be indicated with a minus sign. If there is no cash effect, leave cell blank.)

1. Issued 39,000 shares of capital stock in exchange for $390,000 in cash. 2.

Purchased equipment at a cost of $58,000. $19,000 cash was paid and a note payable was signed for the balance owed.

3.

Purchased inventory on account at a cost of $108,000. The company uses the perpetual inventory system.

4.

Credit sales for the month totaled $129,000. The cost of the goods sold was $79,000.

5. Paid $5,900 in rent on the warehouse building for the month of March. 6.

Paid $6,900 to an insurance company for fire and liability insurance for a one-year period beginning April 1, 2016.

7. Paid $79,000 on account for the merchandise purchased in 3. 8. Collected $64,000 from customers on account. 9. Recorded depreciation expense of $1,900 for the month on the equipment.

Explanation / Answer

Solution:

Requirement 1 Financing Investing Operating 1 $390,000 2 ($19,000) 3 4 5 -5,900 6 -6,900 7 -79,000 8 64,000 9 __________ __________ __________ $390,000 ($19,000) ($27,800) = $343,200

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