Question

The following transactions occurred during March 2021 for the Wainwright Corporation. The company owns and operates a wholesale warehouse.
1. Issued 30,000 shares of common stock in exchange for $300,000 in cash.
2. Purchased equipment at a cost of $40,000. $10,000 cash was paid and a notes payable to the seller was signed for the balance owed.
3. Purchased inventory on account at a cost of $90,000. The company uses the perpetual inventory system.
4. Credit sales for the month totaled $120,000. The cost of the goods sold was $70,000.
5. Paid $5,000 in rent on the warehouse building for the month of March.
6. Paid $6,000 to an insurance company for fire and liability insurance for a one-year period beginning April 1, 2021.
7. Paid $70,000 on account for the merchandise purchased in 3.
8. Collected $55,000 from customers on account.
9. Recorded depreciation expense of $1,000 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.)

Answer 1

Answer:

Assets = liabilities + Paid in capital + retainted earnings

1: 300,000 300,000

2. 30,000 30,000 0 0

3. 90,000 90,000 0 0

4. 50,000 0 0 50,000

5. -5,000 0 0 -5,000

6. 0 0 0 0

7. -70,000 0 0 -70,000

8. 0 0 0 0

9. -1000 0 0 -1000

Explanation:

2: 40,000 - 10,000 = 30,000

10,000 out of 40,000 was paid so the owed amount is 30000, which is a liability and you earn an asset by paying. So asset and liability

3. Three is straight forward.

4. 120,000 - 70,000 = 50,000

revenue is added to stockholders equity which includes retained earnings, but is also labeled an asset.

5. It's -5000 because that is amount we take out of cash to pay rent.

6. It's 0 because the insurance plan doesn't start until April, these transactions however are in march.

7. It's -70,000 because that is the cash going out

8. It's 0 because that account is paid off by the customer

9. It's negative -1000 because it's an expense on depreciation.

Answer 2

The analysis and effect of each transaction on the accounting equation of Wainwright Corporation are as follows:

Transaction Analysis:

1. Cash $300,000 Common Stock $300,000

2. Equipment $40,000 Cash $10,000 Notes Payable $30,000

3. Inventory $90,000 Accounts Payable $90,000

4. Accounts Receivable $120,000 Sales Revenue $120,000

Cost of Goods Sold $70,000 Inventory $70,000

5. Rent Expense $5,000 Cash $5,000

6. Prepaid Insurance $6,000 Cash $6,000

7. Accounts Payable $70,000 Cash $70,000

8. Cash $55,000 Accounts Receivable $55,000

9. Depreciation Expense $1,000 Accumulated Depreciation $1,000

Effect of Each Transaction on the Accounting Equation:

Transaction                   Accounting Equation

                     Assets         =        Liabilities    +   Stockholders Equity

1.                   $300,000    =        $0                     $300,000

2.    $40,000 -$10,000    =      $30,000       +     $0

3.                    $90,000    =     $90,000        +     $0

4.                  $120,000    =      $0                  +    $120,000

4.                  -$70,000     =     $0                  +    -$70,000

5.                   -$5,000      =     $0                  +    -$5,000

6.    $6,000 - $6,000      =     $0                  +    $0

7.                 -$70,000      =    -$70,000       +     $0

8. $55,000 -$55,000     =      $0                 +    $0

9.                   -$1,000      =      $0                 +    -$1,000

                $394,000       =    $50,000        +   $344,000

Thus, the accounting equation represents the equality of assets with liabilities and equity.

Learn more about the accounting equation at brainly.com/question/23920579