Question

Im only searching for this question "which of the following statements is true" I have done the rest of the problem.

Which of the following statement(s) is/are true?

Revenues decreased Rudy Gandolfi’s equity, and expenses and dividends increased it.checkbox unchecked1 of 5 Interest is a "cost" of doing business.checkbox unchecked2 of 5 Dividend is a "cost" of doing business.checkbox unchecked3 of 5 Cash balance will be affected while paying off an accounts payable and collecting an accounts receivable.checkbox unchecked4 of 5 When money is borrowed from the bank, the total assets and the total liabilities will increase.

Rudy Gandolfi owns and operates Rudy’s Furniture Emporium Inc. The balance sheet totals for assets, liabilities, and stockholders’ equity at August 1, 2019, are as indicated. Described here are several transactions entered into by the company throughout the month of August. Required: Indicate the amount and effect of each transaction on total assets, total liabilities, and total stockholders' equity, and then compute the new totals for each category. The first transaction is provided as an illustration. Indicate the financial statement effect. How much were total revenues and total expenses during August? What was the amount of net income (or loss) during August? What were the net changes during the month of August in total assets, total liabilities, and total stockholders' equity? Which of the following statement(s) is/are true?

a.									Assets	=	Liabilities	+	Stockholder's equity
	August 1,2019 total								700000		500000		200000
	August 3, borrowed $ 50000 in cash from the bank								50000		50000		0
	New totals								750000		550000		200000
	August 7,brought merchandise inventory valued at $ 75000 on account								75000		75000		0
	New totals								825000		625000		200000
	August 10,paid $25000 cash for operating expenses								-25000		0		-25000
	New totals								800000		625000		175000
	August 14,received $120000 in cash from sales of merchandise that had cost $ 72000
	Effect of sales revenue								120000		0		120000
	Effect of cost of goods sold								-72000		0		-72000
	New totals								848000		625000		223000
	August 17,paid $ 60000 owed on accounts payable								-60000		-60000		0
	New totals								788000		565000		223000
	August 21,collected $ 44000 of accounts receivable								44000		0		0
									-44000		0		0
	New totals								788000		565000		223000
	August 24,repaid $ 30000 to the bank plus $ 1000 interest								-31000		-30000		-1000
	New totals								757000		535000		222000
	August 29,Paid Rudy Gandolfi a cash dividend of $ 15000								-15000		0		-15000
	August 31,2019 totals								742000		535000		207000
b.	Total revenue:
	Date	Description				$
	Aug 14.	Sale of merchandise				120000
	Total					120000
	Total expenses:
	Date	Description				$
	Aug 10.	Operating expenses				25000
	Aug 14.	Cost of goods sold				72000
	Aug 24.	Interest expenses				1000
	Total					98000
	Net income=Total revenue-Total expenses=120000-98000=$ 22000
c.	Net changes=August 31,2019 totals-August 1,2019 totals
	Total assets,
	Net changes=742000-700000=$ 42000
	Total liabilities,
	Net changes=535000-500000=$ 35000
	Total stockholder's equity,
	Net changes=207000-200000=$ 7000

Answer 1

Sub Part 1

Date	Particulars	Assets	=	Liability	+	Equity	Reasons
1-Aug-2019	Opening Balance	700000	=	500000	+	200000
3-Aug-2019	Borrowings from Bank	50000	=	50000	+	0	Money Borrowed from bank 1. Cash being a asset Increases when received 2. Borrowings-->> Liabilities Increases
7-Aug-2019	Inventory Purchased on account	75000	=	75000	+	0	Inventory purchasd for Credit/Loan 1. Inventory being a asset Increases 2. Loan being a liability Increases.
10-Aug-2019	cash for operating expenses	-25000	=	0	+	-25000	Cash being an asset decreases when paid and Expenses increases.
14-Aug-2019	Sale of merchandise	120000	=	0	+	120000	1. Cash being an asset When received from sale increases 2. Inventories being an asset decreases when sold, and being carried at cost they are to be reduced to such Extent only 3. Profit of 120000-72000 to be considered in equity
	Effect of cost of goods sold	-72000	=	0	+	-72000
17-Aug-2019	owed on accounts payable	-60000	=	0	+	-60000	1. Repayment of Liability Reduces Borrowings and cash Balance
21-Aug-2019	Collected from Account receivable	44000	=	0	+	0	Amount collected from account receivable 1. Cash Being an asset increases when received 2. Account receivable being a asset decreases.
21-Aug-2019	Collected from Account receivable	-44000	=	0	+	0
24-Aug-2019	August 24,repaid $ 30000 to the bank plus $ 1000 interest	-31000	=	-30000	+	-1000	1. Cash Cash being an asset When paid decreases. 2. Borriowing being liability reduces when paid. And shall be reduced to the extent of prinicipal amount. Balance is reduced from Equity.Since interest is in the nature of Expense
29-08-2019	August 29,Paid Rudy Gandolfi a cash dividend of $ 15000	-15000	=		+	-15000	1. Cash Cash being an asset When paid decreases. 2. Dividend is in the nature of expense, to reduced from equity.
	TOTAL	742000	=	595000	+	147000

Sub Part 2

S.No	Partculars	Debit	Credit
1	Sale of merchandise		120000
2	Cost of Goods sold	-72000
3	Operating Expenses	-25000
4	Bank Interest	-1000	-98000
5	Net Profit		22000
6	Less: Dividend		-15000
5	Profit after Dividend		7000

Sub Part 3

S.No	Partilculars	Asset	=	Liabillity	+	Equity
1	Closing Balance as per Sub part 1	742000	=	595000	+	147000
2	Opening Balance as per question	700000	=	500000	+	200000
3	Net Changes	42000	=	95000	+	-53000

Notes:
1. This statement is true, Revenues decreased Rudy Gandolfi’s equity, and expenses and dividends increased it refer sub part3

2.Interest is a cost for doing a business - Yes this statement is true

3. Dividend is a "cost" of doing business - Dividend is reward to shareholders, It is a cost to company - This statement is true.

4. Cash balance will be affected while paying off an accounts payable and collecting an accounts receivable - Yes this statement is true Explanation: Cash Being an asset increases when received and decreases when paid.

5.When money is borrowed from the bank, the total assets and the total liabilities will increase. - This statement is true Explanation: When Cash Recived it increases (Asset side) and Loan increases (Liability side)