The analysis and effect of each transaction on the accounting equation of Wainwright Corporation are as follows:
Transaction Analysis:
1. Cash $300,000 Common Stock $300,000
2. Equipment $40,000 Cash $10,000 Notes Payable $30,000
3. Inventory $90,000 Accounts Payable $90,000
4. Accounts Receivable $120,000 Sales Revenue $120,000
Cost of Goods Sold $70,000 Inventory $70,000
5. Rent Expense $5,000 Cash $5,000
6. Prepaid Insurance $6,000 Cash $6,000
7. Accounts Payable $70,000 Cash $70,000
8. Cash $55,000 Accounts Receivable $55,000
9. Depreciation Expense $1,000 Accumulated Depreciation $1,000
Effect of Each Transaction on the Accounting Equation:
Transaction Accounting Equation
Assets = Liabilities + Stockholders Equity
1. $300,000 = $0 $300,000
2. $40,000 -$10,000 = $30,000 + $0
3. $90,000 = $90,000 + $0
4. $120,000 = $0 + $120,000
4. -$70,000 = $0 + -$70,000
5. -$5,000 = $0 + -$5,000
6. $6,000 - $6,000 = $0 + $0
7. -$70,000 = -$70,000 + $0
8. $55,000 -$55,000 = $0 + $0
9. -$1,000 = $0 + -$1,000
$394,000 = $50,000 + $344,000
Thus, the accounting equation represents the equality of assets with liabilities and equity.
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