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. (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).)(a) Purchased $173 of supplies for cash.(b) Recorded an adjusting entry to record use of $49 of the above supplies.(c) Made sales of $1,271, all on account.(e) Received $738 from customers in payment of their accounts. Purchased equipment for cash, $2,518.(f) Recorded depreciation of building for period used, $743.

Answer 1

Answer and Explanation:

According to the scenario, computation of the given data are as follow:-

                                     Retained Earnings

Particular                            Cash ($)                Net income ($)

a. Purchased supplies for cash -173                          -

b. Adjusting entry to record use of supplies -        - 49

c. Sales made of all on accounts    -                                  1,271

d. Received customer payment of their accounts 738    -

e. Purchased equipment for cash -2,518                            -

f. Depreciation of building for period use -                 -743

In the first transaction the cash is gone so it would be deducted no impact on net income

In the second transaction there is an adjusting entry the same affect the net income in a negative manner  and no impact on cash

In the third transactions sales made which increased the net income and does not have any impact on cash

In the fourth transaction Received payment which increased the cash balance and no impact on net income

In the first transaction the cash is gone so it would be deducted no impact on net income

In the fifth transaction the depreciation is charged so it would decreased the net income and no impact on cash