Question

3-46 CHAPTER 3 The Accounting Information System 1. Issued shares of common stock to investors in exchange for $100,000 in cash. 2. Borrowed $45,000 by issuing bonds. 3. Purchased delivery trucks for $60,000 cash. 4. Received $16,000 from customers for services performed. 5. Purchased supplies for $4,700 on account. 6. Paid rent of $5,200. 7. Performed services on account for $10,000. 8. Paid salaries of $28,000 9. Paid a dividend of $11,000 to shareholders. Instructions Using the following tabular analysis, show the effect of each transaction on the accounting equation. Put explanations for changes to Stockholders' Equity in the right hand margin. Use Illustration 3.4 as a model. Assets Accounts Cash + Receivable + Supplies + Liabilities Accounts Bonds Payable + Payable + Equip- Stockholders' Equity Retained Earnings + Revenues Expenses Dividends Common Stock ment Analytransactions and computer 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 Accounts Common Retained Earnings A/R + Supp. + Equip - Payable Stock + Rev. Exp. . Div. +$20,000 +$5,000 +S4,000 +$750 +55,400 +$9,500 Serv. Rev. - 1,500 -$2,000 -450 -$ 800 Rent Exp +300 -3,000 -300 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

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X- х Chegg16sep - Microsoft Excel File Home Insert Page Layout Formulas Data Review View X % Cut Σ AutoSum Calibri 11 AN Wrap Text Custom BIU T А Copy Paste Format Painter Clipboard 3 Merge & Center .00.0 Insert Delete Format Conditional Format Cell Formatting as Table Styles Styles Clear - Sort & Find & Filter Select Editing Font Alignment Number Cells F7 B С D E F G H 1 K L M N O P Q 1 2 3 Page 3-46 Chapter 3 4 Assets = + Stock Holders Equity Liabilities Bonds Acc. Pay. Payable Cash + Acc. Rec. + Suppl + Equip. = + Common Stock + Rev. - Exps. - Div. Explanation 5 6 1 1,00,000 2 45,000 7 8 1,00,000 45,000 -60,000 16,000 3 60,000 9 4 16,000 Service Revenue 10 4,700 4,700 -5,200 -5,200 11 12 5 6 7 8 10,000 10,000 Rent Expenses Service Revenue Salary Expenses -11,000 -28,000 13 14 -28,000 -11,000 9 15 16 56,800 10,000 4,700 60,000 = 4,700 45,000 + 1,00,000 26,000 -33,200 -11,000 17 1,31,500 1,31,500 18 19 Sheet1 Sheet2 Sheet3 III Ready BO 120% U + W 0 00:04 17-09-2020

X- х Chegg16sep - Microsoft Excel File Home Insert Page Layout Formulas Data Review View X % Cut Σ AutoSum Calibri 11 AN Wrap Text Custom BIU T А Copy Paste Format Painter Clipboard 3 Merge & Center .00.0 Insert Delete Format Conditional Format Cell Formatting as Table Styles Styles Clear - Sort & Find & Filter Select Editing Font Alignment Number Cells F7 B С D E F G H 1 K L M N O P Q 1 2 3 Page 3-46 Chapter 3 4 Assets = + Stock Holders Equity Liabilities Bonds Acc. Pay. Payable Cash + Acc. Rec. + Suppl + Equip. = + Common Stock + Rev. - Exps. - Div. Explanation 5 6 1 1,00,000 2 45,000 7 8 1,00,000 45,000 -60,000 16,000 3 60,000 9 4 16,000 Service Revenue 10 4,700 4,700 -5,200 -5,200 11 12 5 6 7 8 10,000 10,000 Rent Expenses Service Revenue Salary Expenses -11,000 -28,000 13 14 -28,000 -11,000 9 15 16 56,800 10,000 4,700 60,000 = 4,700 45,000 + 1,00,000 26,000 -33,200 -11,000 17 1,31,500 1,31,500 18 19 Sheet1 Sheet2 Sheet3 III Ready BO 120% U + W 0 00:04 17-09-2020

a. Describe Each transactions

1. Issued shares of common stock to investors of $20,000 for cash.
2. Purchased Equipments for $5,000 and Paid $1,000 in cash.
3. Purchased supplies $750 for cash.
4. Provided services worth $9,500 and received $4,100 in cash.
5. Paid $1,500 to accounts payable.
6. Paid a dividend of $2000 to shareholders.
7. Paid Rent $800
8. Received $450 from Accounts Receivable.
9. Paid salaries $3000
10. Received utility bill $300 to be paid.

b. Shareholders Equity increased by $23,400 as follows

20,000 + 9500 - 2000 - 800 - 3000 - 300 = 23,400

c. Net Income for the month = 9500 - 800 - 3000 - 300 = $5,400

Dividend is not an expenses and hence should not be deducted from revenue while determining Net Income.