Question

The following transactions occurred during April 2021 at the Kanthere, a retailer selling headphones. For the selected transactions below, show the amount and impact (increase or decrease) on the accounting equation below. If a transaction impacts the income statement, indicate in the description column the specific income statement line item.
Transaction
1 Purchased a delivery truck for $90,000 that will be used for 4 years. The truck doesn’t have a salvage value.
2 Sold a $100 gift card to a customer for cash.
3 Paid rent for the month of $10,000.
4 Purchased 20 headphones at $30 each on account. Payment is due in 45 days.
5 Sold 4 headphones for $70 each on account.

Answer 1

Answer:

Assets = Liabilities + Stockholders’ Equity = -$6,500

Explanation:

Note: See the attached excel file for recording of the impact (increase or decrease) of April 2021 transactions on the accounting equation.

From the attached excel file, we can obtain the following:

Assets = Total assets = -$99,900 + $90,000 + $600 + $2,800 = -$6,500

Liabilities = Total liabilities = $600

Stockholders’ Equity = Total Stockholders’ Equity = -$7,100

Liabilities + Stockholders’ Equity = $600 - $7,100 = -$6,500

Therefore, the accounting equation holds as follows:

Assets = Liabilities + Stockholders’ Equity = -$6,500

Download xlsx