Question

Analyse transactions and compute net income + + Cash 1. +$20,000 2. -1,000 3. -750 +4,100 5. - 1,500 6. -2,000 7. -800 8. +450 9. -3,000 10. E3.4 (LO 1), AP A tabular analysis of the transactions made during August 2022 by Wolfe Company during its first month of operations is shown as follows. Each increase and decrease in stockholders' equity is explained. Assets = Liabilities + Stockholders' Equity Retained Earnings Accounts Common A/R + Supp. + Equip. Payable + Stock Rev. Exp. Div. +$20,000 +$5,000 +$4,000 +$750 +$5,400 +$9,500 Serv. Rev. - 1,500 -$2,000 -$ 800 -450 -3,000 +300 -300 Rent Exp. Salar. Exp. Util. Exp. Instructions a. Describe each transaction. b. Determine how much stockholders' equity increased for the month. c. Compute the net income for the month.

Answer 1

+ + + Wolfe Company Assets = Liabilties + Stockholders Equity = Accounts + Common + Retained Earnings Rega No. Cash A/R Supplies Equipment Payable + Stock + Revenues - Expenses - Dividends Describe each Transaction 1 20,000 20,000 + Owner invested $20,000 cash in the company in exchange for its common stock 2 (1,000) 5,000 = 4,000 + Purchased equipment for $5,000 by paying $1,000 cash and balance on account 3 (750) 750 + Paid cash for supplies $750. 4 4,100 5,400 + + 9,500 Provided services to customers for $9,500 by collecting $4,100 cash and balance on account 5 (1,500) (1,500) + + Paid $1,500 cash on accounts payable 6 (2,000) + (2,000) Declared and paid $2,000 cash dividend 7 (800) + (800) - Paid $800 cash for rent 8 450 (450) + Collected $450 from customers on account 9 (3,000) (3,000) - Paid $3,000 cash for salaries 10 300 + (300) - Received utilities bill, which is not yet paid Totals 15,500 4,950 750 5,000 = 2,800 + 20,000 + 9,500 (4,100) - (2,000) = = + = + + + + +

Req b

20,000 20,000 Statement of Stockholders Equity For the Month Ended August 31, 2022 Beginning Common Stock Issue of new stock Ending Common Stock Beginning Retained Earnings Add: Net Income Less: Dividends Ending Retained Earnings Total Stockholders Equity 5,400 (2,000) 3,400 23,400

Req c

9,500 Wolfe Company Income Statement For the Month Ended August 31, 2022 Revenues Service Revenue Expenses Salaries expense Rent expense Utilities expense Total Expenses Net Income 3,000 800 300 4,100 5,400

Question 2

Income Stmt heads Rent expense Wonder Travel Agency Inc. Assets = Liabilties + Stockholders Equity = Accounts + Common + Retained Earnings No. Cash A/R Supplies Equipment Payable + Stock + Revenues - Expenses - Dividends 1 30,000 + 30,000 + 2 (900) + + (900) - 3 (3,400) 3,400 = + + 4 200 + + (200) 5 (500) 500 + 6 3,000 9,000 + + 12,000 7 (400) + (400) 8 (200) (200) + 9 (1,800) (1,800) - 10 9,000 (9,000) Totals 34,800 500 3,400 30,000 + 12,000 (2,900) - (400) Advertising expense = + + + Service Revenue + + 9 + + Salaries expense + + +

12,000 Wonder Travel Agency Inc. Income Statement For the Month Ended April 30 Revenues Service Revenue Expenses Salaries expense Rent expense Advertising expense Total Expenses Net Income 1,800 900 200 2,900 9,100