Question

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 $-133 Net Income $0 (a) Purchased $133 of supplies for cash. (b) Recorded an adjusting entry to record use of $31 of the above supplies. (c) Made sales of $1,297, all on account. (d) Received $865 from customers in payment of their accounts. (e) Purchased equipment for cash, $2,528 (f) Recorded depreciation of building for period used,

Answer 1

Answer and Explanation:

The identification of the given transactions are as follows

Item                       cash                net income

a                            -$133                         -

Since the cash is paid so it would be shown in negative and no impact on the net income

b                             -                             -$31

Here the adjusting entry is passed for supplies so the expenses are increased which ultimately reduced the net income

c                              -                             $1,297

Since the sale is made so the same should be shown in the net income

d                             $865                             -

Since cash is received so it shown in the positive amount

e                            -$2,528                       -

Since the cash is paid so it would be shown in negative and no impact on the net income

f                                 -                                  -$610

Since there is depreciation, the expenses are increased which ultimately reduced the net income