Question

The following transactions occurred during March 2021 for the Wainwright Corporation. The company owns and operates a wholesale warehouse 1. Issued 56,000 shares of common stock in exchange for $560,000 in cash. 2. Purchased equipment at a cost of $92,000 $23,000 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 $170,000. The company uses the perpetual inventory system. 4. Credit sales for the month totaled $250,000. The cost of the goods sold was $150,000. 5. Paid $7,500 in rent on the warehouse building for the month of March 6. Paid $7750 to an insurance company for fire and liability insurance for a one-year period beginning April 1, 2021. 7. Pald $150,000 on account for the merchandise purchased in 3. 8. Collected $112,500 from customers on account. 9. Recorded depreciation expense of $2,300 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.) Liabilities Pald-In Capital 560,000 Retained Earnings Assets 560,000 560,000 1 SON 4. 5. 6. 7 8 9.

Answer 1

The basic accounting equation is Assets = Liabilities + Owner's Equity

This can be also broken down and written as Assets = Liabilities + Paid-in Capital + Retained Earnings

Assets	=	Liabilities	+	Paid-in Capital	+	Retained Earnings	Remarks
$ 560,000	=		+	$560,000	+
$ 69,000	=	$69,000	+		+		(92,000 - 23,000)
$170,000	=	$170,000	+		+
$100,000	=		+		+	$100,000	(250,000 - 100,000)
($7,500)	=		+		+	($7,500)
0.00	=		+		+
($150,000)	=	($150,000)	+		+
0.00	=		+		+
($2,300)	=		+		+	($2,300)

Based on the general priciples of accounting, the above table can be drawn for the given transactions to produce the accounting equation of each transaction.