Show the effect of each of the following transactions on
Show the effect of each of the following transactions on the basic accounting equation, by preparing a table like the one in Exhibit 2-3. The fiscal year end of the company (which has been operating for several years) is December 31.
In Exhibit 2-3
a. Purchased equipment costing $10,000, paying cash.
b. Purchased $42,000 of inventory on account during the year.
c. Made sales of $60,000 during the year, of which $24,000 were cash sales.
d. Paid $36,000 owed to suppliers on accounts payable. (This included some amounts owed from the previous year.)
e. Collected $34,000 due from customers on accounts receivable. (This included some amounts due from the previous year.)
f. Paid an insurance premium of $900 on March 31 that provides coverage for the 12-month period starting April 1. The company had no insurance prior to this.
g. Determined that the cost of the inventory sold during the year was $39,000. (This included some inventory purchased the previous year.)
h. Paid $7,000 for utilities expenses during the year.
i. On December 31, the company recognized the amount of insurance expense incurred during the period. (Refer to transaction “f.”)
j. Recorded $3,600 of depreciation for the year on the company’s equipment.
k. Declared (but did not immediately pay) dividends of $400 each quarter, for a total of $1,600.
l. By the end of the year, $1,200 of the dividends were paid.
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