Question

Nature of Transactions

Kristoff Walker operates his own catering service. Summary financial data for February are presented in equation form as follows. Each line designated by a number indicates the effect of a transaction on the equation. Each increase and decrease in owner's equity, except transaction (5), affects net income.

    Assets   =   Liabilities +      Owner's Equity
    Cash + Supplies + Land   =   Accounts Payable   +   Kristoff Walker, Capital   -   Kristoff Walker, Drawing   +   Fees Earned   -   Expenses
Bal.   34,500   4,500   86,300      9,300      116,000                    
1.   +40,400                              +40,400        
2.   -17,300      +17,300                                
3.   -30,000                                    -30,000
4.      +1,700         +1,700                          
5.   -2,300                        -2,300              
6.   -8,300            -8,300                          
7.      -3,500                                 -3,500
Bal.   17,000   2,700   103,600      2,700      116,000      -2,300      40,400      -33,500

b. What is the amount of the net decrease in cash during the month?
$

c. What is the amount of the net increase in owner's equity during the month?
$

d. What is the amount of the net income for the month?
$

e. How much of the net income for the month was retained in the business?
$

Answer 1

a) Net decrease in cash = Ending cash balance - Beginning cash balance

= 17,000 - 34,500

= - $17,500

b) Net increase in owners' equity = Fee earned - Expenses - Kristoff walker drawing

= 40,400 - 33,500 - 2,300

= $4,600

c) Net income = Fee earned - Expenses

= 40,400 - 33,500

= $6,900

d) Net income retained in the business = Net income - Drawing

= 6,900 - 2,300

= $4,600

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