the following transactions occurred for the wayne corporation in march, its first month of operations. the…

the following transactions occurred for the wayne corporation in march, its first month of operations. the company owns and operates a wholesale warehouse.\n1. issued 30,000 shares of common stock in exchange for $300,000 in cash.\n2. purchased equipment at a cost of $40,000. $10,000 cash was paid and a note payable to the seller was signed for the balance owed.\n3. purchased inventory on account at a cost of $90,000.\n4. credit sales for the month totaled $120,000. the cost of the goods sold was $70,000.\n5. paid $5,000 in rent on the warehouse building for the month of march.\n6. paid $6,000 to an insurance company for fire and liability insurance for a one - year period beginning in april.\n7. paid $70,000 on account for the merchandise purchased in transaction 3.\n8. collected $55,000 from customers on account.\n9. paid utilities expense of $1,000 for the month.\nrequired:\n1. analyze each transaction and show the effect of each on the accounting equation for wayne corporation. the first item is provided as an example.\n2. prepare a preliminary balance sheet and preliminary income statement for wayne corporation for march.\ncomplete this question by entering your answers in the tabs below.\nreq 1 req 2a req 2b\nprepare a preliminary income statement for wayne corporation.

the following transactions occurred for the wayne corporation in march, its first month of operations. the company owns and operates a wholesale warehouse.\n1. issued 30,000 shares of common stock in exchange for $300,000 in cash.\n2. purchased equipment at a cost of $40,000. $10,000 cash was paid and a note payable to the seller was signed for the balance owed.\n3. purchased inventory on account at a cost of $90,000.\n4. credit sales for the month totaled $120,000. the cost of the goods sold was $70,000.\n5. paid $5,000 in rent on the warehouse building for the month of march.\n6. paid $6,000 to an insurance company for fire and liability insurance for a one - year period beginning in april.\n7. paid $70,000 on account for the merchandise purchased in transaction 3.\n8. collected $55,000 from customers on account.\n9. paid utilities expense of $1,000 for the month.\nrequired:\n1. analyze each transaction and show the effect of each on the accounting equation for wayne corporation. the first item is provided as an example.\n2. prepare a preliminary balance sheet and preliminary income statement for wayne corporation for march.\ncomplete this question by entering your answers in the tabs below.\nreq 1 req 2a req 2b\nprepare a preliminary income statement for wayne corporation.

Answer

Explanation:

Step1: Analyze Transaction 1

Cash (Asset) increases by $300,000; Common - Stock (Equity) increases by $300,000.

Step2: Analyze Transaction 2

Cash (Asset) decreases by $10,000, Equipment (Asset) increases by $40,000, Note Payable (Liability) increases by $30,000.

Step3: Analyze Transaction 3

Inventory (Asset) increases by $90,000, Accounts Payable (Liability) increases by $90,000.

Step4: Analyze Transaction 4

Accounts Receivable (Asset) increases by $120,000, Revenue (Equity) increases by $120,000; Cost of Goods Sold (Equity - expense) increases by $70,000, Inventory (Asset) decreases by $70,000.

Step5: Analyze Transaction 5

Cash (Asset) decreases by $5,000, Rent Expense (Equity - expense) increases by $5,000.

Step6: Analyze Transaction 6

Pre - paid Insurance (Asset) increases by $6,000, Cash (Asset) decreases by $6,000.

Step7: Analyze Transaction 7

Cash (Asset) decreases by $70,000, Accounts Payable (Liability) decreases by $70,000.

Step8: Analyze Transaction 8

Cash (Asset) increases by $55,000, Accounts Receivable (Asset) decreases by $55,000.

Step9: Analyze Transaction 9

Cash (Asset) decreases by $1,000, Utilities Expense (Equity - expense) increases by $1,000.

Preliminary Income Statement

Particulars Amount ($)
Revenue 120,000
Cost of Goods Sold 70,000
Rent Expense 5,000
Utilities Expense 1,000
Net Income 44,000

Preliminary Balance Sheet

Assets Amount ($) Liabilities and Equity Amount ($)
Cash ($300,000 - $10,000 - $5,000 - $6,000 - $70,000+ $55,000 - $1,000) 263,000 Accounts Payable ($90,000 - $70,000) 20,000
Accounts Receivable ($120,000 - $55,000) 65,000 Note Payable 30,000
Inventory ($90,000 - $70,000) 20,000 Common Stock 300,000
Pre - paid Insurance 6,000 Retained Earnings (Net Income) 44,000
Equipment 40,000
Total Assets 394,000 Total Liabilities and Equity 394,000

Answer:

The preliminary income statement shows a net income of $44,000. The preliminary balance sheet shows total assets of $394,000, total liabilities of $50,000, and total equity of $344,000 (common stock of $300,000 and retained earnings of $44,000) with the accounting equation (Assets = Liabilities + Equity) in balance.