Question

1. Issued 42,000 shares of common stock in exchange for $420,000 in cash. 2. Purchased equipment at a cost of $64,000. $16,000 cash was paid and a notes payable to the seller was signed for the balance owed. 3. Purchased inventory on account at a cost of $128,000. The company uses the perpetual inventory system. 4. Credit sales for the month totaled $180,000. The cost of the goods sold was $108,000. 5. Paid $5,750 in rent on the warehouse building for the month of March. 6. Paid $6,700 to an insurance company for fire and liability insurance for a one-year period beginning April 1, 2021. 7. Paid $108,000 on account for the merchandise purchased in 3. 8. Collected $81,000 from customers on account. 9. Recorded depreciation expense of $1,600 for the month on the equipment. Required: Analyze each transaction and show the effect of each on the accounting equation for a corporation. (Amounts to be deducted should be indicated by a minus sign. Enter the net change on the accounting equation.) Paid-In Capital Retained Earnings Liabilities Assets 1. 420,000 420,000 48,000 2. 48,000 128,000 128,000 3. 72,000 72,000 4. 5. 6. 7. 8. 9.

Answer 1

Answer: Retained Earnings Liabilities Paid-In Capital 420,000 | Assets 420,0001; 48,0001 128,000 72,000/ -5,750/? 48,0001+ 128,000 | .| + + ܦ݁ܦ݁ܫܟ݁ܟ݁]dldldl 72,000 5,750/ + + -108,000|s -108,000 + + -1,600| -1,600