Question

Indicate how each of the following transactions on June 30 affect the company’s financial statements. On June 30, The Corner Café paid cash for insurance for the six-month period that covers the last two quarters of the year. On June 30, Corner Café paid in wages to employees who worked during the last week of June. On June 30, Corner Café received a bill for electricity used during June. The company will not pay the bill until shortly before its due date in July.

Answer 1

All the statements will have different affects on the company's financial statements.

Step-by-step explanation:

1. On June 30, The Corner Café paid cash for insurance for the six-month period that covers the last two quarters of the year: For this, an asset which is other than Cash will be shown as increased on the balance sheet.

2. On June 30, Corner Café paid in wages to employees who worked during the last week of June: For this, Corner cafe will show the debit of Wages Expense for the amount he paid to the employees who worked in the last week of June. So, one expense will increase on the income statement.

3. On June 30, Corner Café received a bill for electricity used during June. The company will not pay the bill until shortly before its due date in July: In this case there is a liability, electricity bill which needs to be paid on the balance sheet has increased. Also, an expense on the income statement has gone up.