Question

Neko Case decides to open a cleaning and laundry service near the local college campus that will operate as a corporation. Analyze the following transactions for the month of June in to their effect on the basic accounting equation. Record each transaction by increasing decreasing (-) the dollar amount of each item affected. Calculate the Net Income Transactions (1) Issued stock in exchange for $25,000 cash on June 1. (2) Purchased equipment for $5,000 paying $2,000 in cash and the remainder due in 30 days (3) Purchased supplies for $1,500 cash. (4) Received a bill from College News for $400 for advertising in the campus newspaper (5) Cash receipts from customers for cleaning and laundry amounted to $2,500. (6) Paid salaries of $500 to student workers. (7) Billed the Lion Soccer Team $350 for cleaning and laundry services. (8) Paid $400 to College News for advertising that was previously billed in Transaction 4. (9) Paid dividends of $1,300. (10) Incurred utility expenses for month on account, $600. Accounts Accounts Common Retained Cash + Receivable +Supplies +Equipment = Payable + Stock + Earnings

Answer 1

Accounting equation

	Cash	+	Account receivable	+	Supplies	+	Equipment	=	Account payable	+	Common Stock	+	Retained earnings
1.	25000										25000
2.	-2000						5000		3000
3	-1500				1500
4									400				-400
5	2500												2500
6	-500												-500
7			350										350
8	-400								-400
9	-1300												-1300
10									600				-600