Question

The following transactions occurred during March 2021 for the Wainwright Corporation. The company owns and operates a wholesale warehouse.

a. Issued 54,000 shares of non-par common stock in exchange for $540,000 in cash.
b. Purchased equipment at a cost of $88,000. $22,000 cash was paid and a notes payable to the seller was signed for the balance owed.
c. Purchased inventory on account at a cost of $164,000. The company uses the perpetual inventory system.
c. Credit sales for the month totaled $240,000. The cost of the goods sold was $144,000.
d. Paid $7,250 in rent on the warehouse building for the month of March.
e. Paid $7,600 to an insurance company for fire and liability insurance for a one-year period beginning April 1, 2021.
d. Paid $144,000 on account for the merchandise purchased in 3.
f. Collected $108,000 from customers on account.
g. Recorded depreciation expense of $2,200 for the month on the equipment.

Required:
Analyze each transaction and show the effect of each on the accounting equation for a corporation.

Answer 1

The accounting equation for transaction is :

Assets = Liabilities + paid in capital + retained earning

1. 54,000 0 54,000 0

2. 66000 66000 0 0

3. 164000 164000 0 0

4. 96000 0 0 96000

5. -7250 0 0 -7250

6. 0 0 0 0

7. -144000 -144000 0 0

8. 0 0 0 0

9. -2200 0 0 -2200

226,550 860,00 540,00 865,50