Exam 2: Transaction Analysis

Martin Company had the following transactions during its first month of operations: June 1 The company received cash of $35,000 and issued common stock to the shareholders. 2 Borrowed $20,000 from the bank and signed a long-term note payable. 8 Purchased equipment with a short-term note payable for $10,000. 9 Performed services billed at $3,000 and received cash of $3,000. 10 Performed services for a client on account, $6,500. 12 Employees worked two weeks and were paid salaries of $1,000. 15 Paid the short-term note payable from the June 8 purchase. 22 Purchased office supplies on account for $7,000. 30 Paid amount due for office supplies. 30 Paid June's monthly rent of $500. 30 Paid the monthly income taxes of $2,200. 30 The Board of Directors declared and paid dividends of $1,000. Required: 1. Journalize the entries. Omit the explanations. 2. Prepare a single-step income statement for the first month of operations. Include a proper heading. 3. Prepare a statement of retained earnings for the first month of operations. Include a proper heading.

When preparing the financial statements from a spreadsheet that shows the results of a transaction analysis:

A business sold equipment for $40,300 cash. The equipment was purchased one month earlier for $40,300 but the plans for the equipment changed.

Which of the following transactions includes a credit to cash?

Transaction analysis and the accounting equation have been used to record several transactions for a company. The transactions are now recorded on a multi-column spreadsheet. When preparing a balance sheet with this spreadsheet, which column(s)would be used?

An account with a normal debit balance is most often an asset or revenue account.

Lori Nichols started an engineering firm, Engineering Enterprises P.C. During its first month of operations, the following transactions were completed: I. Lori invested $35,000 in the business, which in turn issued common stock to her. II. The business purchased equipment on account for $10,000. III. The business provided engineering services on account, $13,000. IV. The business paid salaries to the receptionist, $4000. V. The business received cash from a customer as payment on account $11,000. VI. The business borrowed $13,000 from the bank, issuing a note payable. At the end of the month, cash equals:

Put an "X" in the appropriate box to indicate if the normal balance of an account is a debit or a credit balance.

The financial statements can be prepared from the trial balance.

Indicate whether the account is an asset (A), liability (L), stockholders' equity (SE), revenue (R)or expense (E)account. Also indicate if the account would appear on the Balance Sheet (BS), Income Statement (IS), Statement of Cash Flows (CF)or the Statement of Retained Earnings (SRE).

The total debits to an account must equal the total credits to the account.

Although a trial balance can be prepared at any time, the most common time is at the end of the accounting period.

To compute the ending balance of retained earnings:

List and briefly discuss the three major components of stockholders' equity.

A company performed services for a customer for cash. This transaction increased assets and:

The account is the basic summary device of accounting.

Indicate whether the account is increased with a debit or a credit. Also indicate if the account would appear on the Balance Sheet (BS), Income Statement (IS), or the Statement of Retained Earnings (SRE).

In transaction analysis, the declaration and payment of dividends is recorded in the ________ and ________ columns of the accounting equation.

Every business transaction involves both at least one debit and at least one credit.

Which of the following is NOT a business transaction?