The following business transactions occurred during Heidi’s Smoothy Shop, Inc.’s first month of business:
a. Heidi began her business by depositing $22,000 into the business checking account in exchange for common stock.
b. The shop paid travel expenses in the amount of $325.
c. The shop borrowed $12,000 from the bank for operating capital.
d. The shop purchased $600 worth of office supplies (for future use) from Office Supermarket for cash.
e. During the month, the shop earned revenue of $10,000 cash.
f. The shop paid the monthly rent on the retail space in the amount of $1,100.
g. The shop paid the staff $2,000.
h. Other operating expenses for the month were $1,375, which were paid in cash.
i. On the last day of the month, the shop purchased equipment costing $10,000 by signing a note payable with the bank.
j. The company declared and paid a dividend of $235 to Heidi, the firm’s only shareholder.

For each transaction in items (a)–(j), do the following:
1. Identify whether it is an operating, investing, or financing transaction.
2. Determine whether there is an increase, decrease, or no effect on the total assets of the business.
3. Determine whether there is an increase, decrease, or no effect on net income.
4. Indicate on which financial statement each amount would appear: the income statement (IS), the balance sheet (BS), the statement of changes in stockholder’s equity (SE), or the statement of cash flows (CF). (Some will be shown on more than one statement.)

  • CreatedSeptember 01, 2014
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