Question

Paid wages of $1,250 for the current period (example). Borrowed $6,250 cash from local bank using a short-term note. Purchased $2,500 of equipment on credit. Earned $500 of sales revenue; collected cash. Received $1,000 of utilities services, on credit. Earned $2,120 of service revenue, on credit. Paid $375 cash on account to a supplier. Incurred $85 of travel expenses; paid cash. Earned $500 of service revenue; collected half in cash, with balance on credit. Collected $130 cash from customers on account. Incurred $360 of advertising costs; paid half in cash, with balance on credit.

Required: For each of the transactions, complete the following table, indicating the account, amount, and direction of the effect (+ for increase and − for decrease) of each transaction under the accrual basis. Include revenues and expenses as subcategories of stockholders’ equity, as shown for the first transaction, which is provided as an example.

Determine the company’s preliminary net income.

Answer 1

Answer: Amount & cash PO Assels Amount = Liability Amount | stockholders equeily -$1250 salaries and wages - $1,250 expenses 1o cash $6.950 Notes payable | $6.950 e Equipment $2,500 Accounts payable | $2,500 + - cash $ 500 + Sales Revenue $500 El Accounts payable $1,000 + utililies expense 1000 Accounts Receivable $2,120 # Service Revende $2,120 - Cash |-$375 L Accounts payable -$375 In cash -$85 + Travel expense -$85 Cash $250 tservice revenue $500 Accounts & eceivable $ 250 cash $130 II Accounts receivable -130 cash |- $180 Accounti payable $180 - Advertising expense 1-$360 2) Calculate the company's preliminary Net Income. - preliminary Net Income = Revenue - Eapenses. Kevenue = d) sales Revenue +18) Sales Revenue +i) Sales Revenue. = $ 500 + $ 2,120 + $500 :. Revenue = $3,120 Expenses = salaries and wagos tutilities + Travel + Adverlising. = $1,250 + $1000485+$360 .. Expenses. $2,695. Preliminary Net Income = $3,120-$ 2,695. .. preliminary Net Income = $425.