Question

or each of the following independent events, indicate the amounts and direction of effects on the elements of the statement of financial position and statement of earnings. Using the following format, indicate + for increase, and - for decrease, and NE for no effect. Also, included the specific account name affected.

Transactions:

Example: Rent in the amount of $1,500 is owing to the landlord at year end.

1. Issued common share for $10,000 cash.
2. Purchase $5,000 of inventory on account.
3. Sold goods to customers for $2,300 on account. Cost of goods sold was $1,000
4. Received $600 utility bill to be paid next month.
5. Paid $1,800 for insurance coverage that begins next month.
6. Hired a new employee whose salary will be $2,000 per month.
7. Owe employees $4,500 at the end of the year.
8. Supplies used during the year is $6,000. This amount is currently recorded in the office supplies inventory account.

	Statement of Financial Position			Statement of Earnings
Event	Assets	Liabilities	Shareholders’ Equity	Revenues	Expenses
example	NE	+1,500 Rent Payable	-1,500 R/E	NE	+1,500 Rent Exp
1)
2)
3)
4)
5)
6)
7)
8)
9)

1. Assets currently include prepaid rent expense of $2,800 of which $1,600 has expired by year end.

Answer 1

Impact