Accounting: What the Numbers Mean 11th Edition by Wayne McManus,Daniel Viele,David Marshall

Exercise 25

Transaction analysis-quantitative; analyze results Stacy-Ann Kelly owns and operates Kelly's Furniture Emporium, Inc. The balance sheet totals for assets, liabilities, and stockholders' equity at August 1, 2016, are as indicated. Described here are several transactions entered into by the company throughout the month of August.
Required:
a. Indicate the amount and effect (+ or ?) of each transaction on total assets, total liabilities, and total stockholders' equity, and then compute the new totals for each category. The first transaction is provided as an illustration.

b. What was the amount of net income (or loss) during August? How much were total revenues and total expenses during August?
c. What were the net changes during the month of August in total assets, total liabilities, and total stockholders' equity?
d. Explain to Stacy-Ann Kelly which transactions caused the net change in her stockholders' equity during August.
e. Explain why dividend payments are not an expense, but interest is an expense.
f. Explain why the money borrowed from the bank increased assets but did not increase net income.
g. Explain why paying off accounts payable and collecting accounts receivable do not affect net income.