Question

Brief Exercise 4-1 Transactions that affect earnings do not necessarily affect cash. Identify the effect, if any, that each of the following transactions would have upon cash and net income. The first transaction has been completed as an example. (If an amount reduces the account balance then enter with negative sign preceding the number e.g. -15,000 or parentheses e.g. (15,000).) Cash Net Income $0 -$120 (a) Purchased $120 of supplies for cash. (b) Recorded an adjusting entry to record use of $30 of the above supplies. (c) Made sales of $1,400, all on account. (d) Received $750 from customers in payment of their accounts. (e) Purchased equipment for cash, $2,900. (f) Recorded depreciation of building for period used, $580

Answer 1

Answer:

Explanation:

a. In this transaction, the cash balance is reduced by ($120) and no impact on the net income as the purchase is made so there is an outflow of cash

b. In this transaction, the cash balance has no impact and the net income balance is reduced by ($30) as it is treated as an expense

c.  In this transaction, the cash balance has no impact and the net income balance is increased by $1,400 as the revenue is made

d.  In this transaction, the cash balance is increased by $750 and no impact on the net income as there is an inflow of cash

e. In this transaction, the cash balance is reduced by ($2,900) and no impact on the net income as there is an outflow of cash

f.  In this transaction, the cash balance has no impact and the net income balance is decreased by ($580) as depreciation is a non-cash expense