Question

The following transactions occurred during March 2021 for the Wainwright Corporation. The company owns and operates a wholesale warehouse.
Issued 22,000 shares of common stock in exchange for $220,000 in cash.
Purchased equipment at a cost of $24,000. $6,000 cash was paid and a notes payable to the seller was signed for the balance owed.
Purchased inventory on account at a cost of $68,000. The company uses the perpetual inventory system.
Credit sales for the month totaled $80,000. The cost of the goods sold was $48,000.
Paid $3,250 in rent on the warehouse building for the month of March.
Paid $5,350 to an insurance company for fire and liability insurance for a one-year period beginning April 1, 2021.
Paid $48,000 on account for the merchandise purchased in 3.
Collected $36,000 from customers on account.
Recorded depreciation expense of $600 for the month on the equipment.
Required:
Analyze each transaction and show the effect of each on the accounting equation for a corporation. (Amounts to be deducted should be indicated by a minus sign. Enter the net change on the accounting equation.)
Paid-In Capital Retained Earnings Assets Liabilities + 220,000 1 220,000 2. 3 4. 5 6 7. 8 9 LC

Answer 1

Answer:

Assets = Liabilities + Stockholders’ Equity = $286,150

Explanation:

Note: See the attached excel file for the Analysis of the Effect of March 2021 on the Accounting Equation.

From the attached excel file, the following can be obtained:

Assets = Total assets = $193,400 + $23,400 + $20,000 + $44,000 + $5,350 = $286,150

Liabilities = Total liabilities = $18,000 + $20,000 = $38,000

Stockholders’ Equity = Total Stockholders’ Equity = $220,000 + $28,150 = $248,150

Liabilities + Stockholders’ Equity = $38,000 + $248,150 = $286,150

Therefore, the accounting equation holds as follows:

Assets = Liabilities + Stockholders’ Equity = $286,150

Download xlsx