Question

During 2017, its first year of operations as a delivery service, Grouper Corp. entered into the following transactions. 1. Issued shares of common stock to investors in exchange for $123,000 in cash. 2. Borrowed $37,000 by issuing a note. 3. Purchased delivery trucks for $64,000 cash. 4. Received $15,000 from customers for services performed. 5. Purchased supplies for $6,100 on account. 6. Paid rent of $5,800. 7. Performed services on account for $11,800. 8. Paid salaries of $27,700. 9. Paid a dividend of $10,400 to shareholders. Using the following tabular analysis, show the effect of each transaction on the accounting equation. Put explanations for changes to revenues or expenses in the right-hand column. (If a transaction causes a decrease in Assets, Liabilities or Stockholders' Equity, place a negative sign (or parentheses) in front of the amount entered for the particular Asset, Liability or Equity item that was reduced.)

Answer 1

Assets								Liabilities and Owner's Equity
Cash	+	Accounts Receivable	+	Supplies	+	Equipment	=	Accounts Payable	+	Notes Payable	+	Retained Earnings	+	Common Stock		Explanation
$123,000														$123,000
$37,000										$37,000
-$64,000						$64,000
$15,000		-$15,000
				$6,100				$6,100
-$5,800												-$5,800				Rent expense will reduce the profit and hence reduce the retained earnings
		$11,800										$11,800				Revenues will increase the profits and hence increase the retained earnings
-$27,700												-$27,700				Salaries expense will reduce the profit and hence reduce the retained earnings
-$10,400												-$10,400				Dividend is paid from the retained earnings hence it would reduce the net earnings
$67,100		-$3,200		$6,100		$64,000		$6,100		$37,000		-$32,100		$123,000
Note-
(i) Amount transferred to retained earnings represents the net balance of revenues and expenses which is called the net income for the period.
(ii) Dividends are declared from the retained earnings of the company and have an effect of reducing the retained earnings balance