Question

Problem 7

Sara Obermeyer decides to open a pizza parlor near the local college campus that will operate as a corporation. Analyze the following transactions for the month of June in terms of their effect on the basic accounting equation. Record each transaction by increasing (+) or decreasing (–) the dollar amount of each item affected. Indicate the new balance of each item after a transaction is recorded. It is not necessary to identify the cause of changes in stockholders’ equity.

Transactions

   (1)     Sara Obermeyer invests $25,000 cash in exchange for common stock to start a pizza parlor business on June 1.

   (2)     Purchased equipment for $4,000 paying $2,000 in cash and the remainder due in 30 days.

   (3)     Purchased supplies for $1,200 cash.

   (4)     Received a bill from Campus News for $200 for advertising in the campus newspaper.

   (5)     Cash receipts from customers for pizza sales amounted to $1,500.

   (6)     Paid salaries of $200 to employees.

   (7)     Billed the Tiger Football Team $300 for pizzas ordered.

   (8)     Paid $200 to Campus News for advertising that was previously billed in Transaction 4.

   (9)     Sara Obermeyer was paid dividends of $1,200.

(10)     Incurred utility expenses for month on account, $100.

Trans-                          Accounts                                                   Accounts                Common      Retained

action          Cash +    Receivable + Supplies   + Equipment   =    Payable                      +     Stock    +          Earnings

   (1)

_____________________________________________________________

Balance

   (2)

_____________________________________________________________

Balance

   (3)

_____________________________________________________________

Balance

   (4)

_____________________________________________________________

Balance

   (5)

_____________________________________________________________

Balance

   (6)

_____________________________________________________________

Balance

   (7)

_____________________________________________________________

Balance

   (8)

_____________________________________________________________

Balance

   (9)

_____________________________________________________________

Balance

(10)

_____________________________________________________________

Totals

                                                                                                                

Answer 1

	Cash	Accounts Receivable	Supplies	Equipment	Accounts Payable	Common stock	Retained Earnings
1	$      25,000					$      25,000
Bal	$      25,000	$               -	$               -	$               -	$               -	$      25,000	$               -
2	$       (2,000)			$        4,000	$        2,000
Bal	$      23,000	$               -	$               -	$        4,000	$        2,000	$      25,000	$               -
3	$       (1,200)		$        1,200
Bal	$      21,800	$               -	$        1,200	$        4,000	$        2,000	$      25,000	$               -
4					$           200		$          (200)
Bal	$      21,800	$               -	$        1,200	$        4,000	$        2,200	$      25,000	$          (200)
5	$        1,500						$        1,500
Bal	$      23,300	$               -	$        1,200	$        4,000	$        2,200	$      25,000	$        1,300
6	$          (200)						$          (200)
Bal	$      23,100	$               -	$        1,200	$        4,000	$        2,200	$      25,000	$        1,100
7		$           300					$           300
Bal	$      23,100	$           300	$        1,200	$        4,000	$        2,200	$      25,000	$        1,400
8	$          (200)				$          (200)
Bal	$      22,900	$           300	$        1,200	$        4,000	$        2,000	$      25,000	$        1,400
9	$       (1,200)						$       (1,200)
Bal	$      21,700	$           300	$        1,200	$        4,000	$        2,000	$      25,000	$           200
10	$          (100)						$          (100)
Bal	$      21,600	$           300	$        1,200	$        4,000	$        2,000	$      25,000	$           100

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