Question

Selected transactions for Protheroe Corporation during its first month in business are presented below.Sept. 1 Issued common stock in exchange for $21,060 cash received from investors.5 Purchased equipment for $8,570, paying $2,800 in cash and the balance on account.8 Performed services on account for $18,000.14 Paid salaries of $1,200.25 Paid $3,100 cash on balance owed for equipment.30 Paid $900 cash dividend.Exercise 3-11 Selected transactions for ProtheroeExercise 3-11 Selected transactions for Protheroe Complete a tabular analysis of the September transactions. (If a transaction causes a decrease in Assets, Liabilities or Stockholders' Equity, place a negative sign (or parentheses) in front of the amount entered for the particular Asset, Liability or Equity item that was reduced. See Illustration 3-3 for example.)

Answer 1

Sept. 1 Issued common stock in exchange for $21,060 cash received from investors. Assets (increase = $21,060) = Liabilities (NA) + Stockholders' Equity (increase = $21,060)

5 Purchased equipment for $8,570, paying $2,800 in cash and the balance on account. Assets (increase = $5,770) = Liabilities (increase = $5,770) + Stockholders' Equity (NA)

8 Performed services on account for $18,000. Assets (increase = $18,000) = Liabilities (NA) + Stockholders' Equity (increase = $18,000)

14 Paid salaries of $1,200. Assets (decrease = $1,200) = Liabilities (NA) + Stockholders' Equity (decrease = $1,200)

25 Paid $3,100 cash on balance owed for equipment. Assets (decrease = $3,100) = Liabilities (decrease = $3,100) + Stockholders' Equity (NA)

30 Paid $900 cash dividend. Assets (decrease = $900) = Liabilities (NA) + Stockholders' Equity (decrease = $900)

***(NA) = Not Applicable

Step-by-step explanation:

• Common stock issued to the tune of $21,060 would lead to increase in cash and increase in common stock.
• The $2,800 cash paid for the purchase of equipment would have a nil effect on the asset; meanwhile the balance on account would increase asset (Equipment cost) and increase liabilities.
• Services of $18,000 on account increase accounts receivable (asset) and sales revenue (ultimately, equity).
• Salaries payment of $1,200 is an outflow of cash (asset) and increase in staff cost (this reduces the net income and ultimately, equity).
• Payment of $3,100 owed for equipment is a reduction in liabilities and an outflow of cash.
• Cash dividend of $900 is an outflow of cash and a reduction in retained earnings (ultimately, equity).