Question

The following transactions occurred during March 2018 for the Wainwright Corporation. The company owns and operates a wholesale warehouse. 1. Issued 22.000 shares of common stock In exchange for $220,000 In cash. 2 Purchased equipment at a cost of $24,000. $6,000 cash was pald and a note payable was signed for the balance owed. 3. Purchased Inventory on account at a cost of $68,000. The company uses the perpetual Inventory system 4. Credit sales for the month totaled $80,000. The cost of the goods sold was $48,000. 5. Pald $3,250 In rent on the warehouse building for the month of March. 6. Pald $5,350 to an Insurance company for fire and liablity Insurance for a one-year perlod beginning April 1,2018. 7. Pald $48,000 on account for the merchandise purchased in 3. 8. Collected $36,000 from customers on account. 9. Recorded depreclation expense of $600 for the month on the equlpment. 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.) Assets Liabilities +Paid-In Capital Retained Earnings 2.

Answer 1

	Assets	=	Liabilities	+	Paid-in	+	Retained
					Capital		Earnings
1	220,000		0		220,000
2	18000		18,000
3	68000		68,000
4	32,000		0				32000
5	-3,250		0				-3250
6	0		0
7	-48,000		-48000
8	0		0
9	-600		0				-600
	for transaction 6 prepaid insurance increased and cash decreased , the net
	effect of which is 0
	similary for transaction 8 cash increased and account receivable decreased