Homework SourseNature of Transactions Teri West operates her own catering s
Nature of Transactions
Teri West operates her own catering service. Summary financial data for July 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 stockholders\' equity, except transaction (5), affects net income.
a. (1) Select the description for transaction 1.
Provided catering services for cash.
a. (2) Select the description for transaction 2.
Purchase of land for cash.
a. (3) Select the description for transaction 3.
Payment of cash for expenses.
a. (4) Select the description for transaction 4.
Purchase of supplies on account.
a. (5) Select the description for transaction 5.
Paid cash dividends.
a. (6) Select the description for transaction 6.
Payment of cash to creditors.
a. (7) Select the description for transaction 7.
Recognition of cost of supplies used.
b. What is the amount of the net increase in cash during the month?
$
c. What is the amount of the net increase in stockholders\' 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?
$
| Assets | = | Liabilities + | Stockholders\' Equity | ||||||||||||
| Cash + Supplies + Land | = | Accounts Payable | + | Common Stock | + | Retained Earnings | - | Dividends | + | Fees Earned | - | Expenses | |||
| Bal. | 40,000 | 3,000 | 82,000 | 7,500 | 50,000 | 67,500 | |||||||||
| 1. | +71,800 | +71,800 | |||||||||||||
| 2. | -15,000 | +15,000 | |||||||||||||
| 3. | -47,500 | -47,500 | |||||||||||||
| 4. | +1,100 | +1,100 | |||||||||||||
| 5. | -5,000 | -5,000 | |||||||||||||
| 6. | -4,000 | -4,000 | |||||||||||||
| 7. | -1,500 | -1,500 | |||||||||||||
| Bal. | 40,300 | 2,600 | 97,000 | 4,600 | 50,000 | 67,500 | -5,000 | 71,800 | -49,000 |
Solution
a. (1) Select the description for transaction 1.
Provided catering services for cash.
a. (2) Select the description for transaction 2.
Purchase of land for cash.
a. (3) Select the description for transaction 3.
Payment of cash for expenses.
a. (4) Select the description for transaction 4.
Purchase of supplies on account.
a. (5) Select the description for transaction 5.
Paid cash dividends.
a. (6) Select the description for transaction 6.
Payment of cash to creditors.
a. (7) Select the description for transaction 7.
Recognition of cost of supplies used.
b. What is the amount of the net increase in cash during the month?
$ 300 [ 71800-15000-47500-5000-4000]
c. What is the amount of the net increase in stockholders\' equity during the month?
$ 22800 [71800-47500-1500]
d. What is the amount of the net income for the month?
$ -5000
e. How much of the net income for the month was retained in the business?
$ 62500
