mini - exercise 4 - 3 (static) record transactions and adjustments lo 4 - 2, 4 - 6, 4 - 7\nthe transactions…

mini - exercise 4 - 3 (static) record transactions and adjustments lo 4 - 2, 4 - 6, 4 - 7\nthe transactions and adjustments related to the first month of operations of zoe amelia corporation were as follows:\nrequired:\nfor the transactions/adjustments given below show the effect, if any, of the transaction entry or adjusting entry on the appropriate balance sheet category or on net income by indicating the account name(s) affected and whether each is an addition (+) or subtraction (-). items that affect net income should be shown as affecting stockholders equity.\n| transaction or adjustment | a | l | se | net income |\n| --- | --- | --- | --- | --- |\n| a. issued common stock to the initial stockholders in exchange for their cash investment | + cash | | + common stock | + common stock |\n| b. signed a lease for office space and paid the first three months of rent in advance | + prepaid rent | | | |\n| b. signed a lease for office space and paid the first three months of rent in advance | + equipment | | | |\n| c. purchased office equipment and shelving for cash | | | | |\n| c. purchased office equipment and shelving for cash | | | | |\n| d. purchased merchandise inventory, made a partial payment in cash, and agreed to pay the balance within 30 days | | | | |\n| d. purchased merchandise inventory, made a partial payment in cash, and agreed to pay the balance within 30 days | | | | |\n| e. sold merchandise inventory on account for an amount greater than the cost of the inventory sold | | | | |\n| e. sold merchandise inventory on account for an amount greater than the cost of the inventory sold | | | | |\n| f. paid employees for the first two weeks of the month | | | | |\n| g. at the end of the month, accrued wages owed to employees for the second two weeks of the month | | | | |\n| h. recognized rent expense for one month of the payment of the three - month transaction b (as a reclassification adjusting entry) | prepaid rent | | | |

mini - exercise 4 - 3 (static) record transactions and adjustments lo 4 - 2, 4 - 6, 4 - 7\nthe transactions and adjustments related to the first month of operations of zoe amelia corporation were as follows:\nrequired:\nfor the transactions/adjustments given below show the effect, if any, of the transaction entry or adjusting entry on the appropriate balance sheet category or on net income by indicating the account name(s) affected and whether each is an addition (+) or subtraction (-). items that affect net income should be shown as affecting stockholders equity.\n| transaction or adjustment | a | l | se | net income |\n| --- | --- | --- | --- | --- |\n| a. issued common stock to the initial stockholders in exchange for their cash investment | + cash | | + common stock | + common stock |\n| b. signed a lease for office space and paid the first three months of rent in advance | + prepaid rent | | | |\n| b. signed a lease for office space and paid the first three months of rent in advance | + equipment | | | |\n| c. purchased office equipment and shelving for cash | | | | |\n| c. purchased office equipment and shelving for cash | | | | |\n| d. purchased merchandise inventory, made a partial payment in cash, and agreed to pay the balance within 30 days | | | | |\n| d. purchased merchandise inventory, made a partial payment in cash, and agreed to pay the balance within 30 days | | | | |\n| e. sold merchandise inventory on account for an amount greater than the cost of the inventory sold | | | | |\n| e. sold merchandise inventory on account for an amount greater than the cost of the inventory sold | | | | |\n| f. paid employees for the first two weeks of the month | | | | |\n| g. at the end of the month, accrued wages owed to employees for the second two weeks of the month | | | | |\n| h. recognized rent expense for one month of the payment of the three - month transaction b (as a reclassification adjusting entry) | prepaid rent | | | |

Answer

Explanation:

Step1: Analyze transaction a

Issuing common stock for cash increases cash (asset +) and common - stock (equity +). No impact on net income.

Step2: Analyze transaction b

Paying rent in advance increases prepaid rent (asset +) and decreases cash (asset -). No impact on net income.

Step3: Analyze transaction c

Purchasing office equipment for cash increases equipment (asset +) and decreases cash (asset -). No impact on net income.

Step4: Analyze transaction d

Purchasing merchandise inventory with partial cash and credit increases inventory (asset +), decreases cash (asset -) and increases accounts payable (liability +). No impact on net income.

Step5: Analyze transaction e

Selling merchandise inventory for more than cost increases cash/accounts - receivable (asset +), decreases inventory (asset -), increases revenue (equity +) and increases net income (as revenue > cost of goods sold).

Step6: Analyze transaction f

Paying employee wages decreases cash (asset -) and decreases retained earnings (equity -) and decreases net income.

Step7: Analyze transaction g

Recording accrued wages increases wages payable (liability +) and decreases retained earnings (equity -) and decreases net income.

Step8: Analyze transaction h

Recognizing rent expense decreases prepaid rent (asset -) and decreases retained earnings (equity -) and decreases net income.

Transaction or Adjustment A L SE Net Income
a. Issued common stock + Cash + Common stock
b. Signed lease for office space (first three - month rent in advance) + Prepaid rent, - Cash
c. Purchased office equipment + Equipment, - Cash
d. Purchased merchandise inventory + Inventory, - Cash, + Accounts payable
e. Sold merchandise inventory (amount > cost) + Cash/Accounts - receivable, - Inventory + Revenue +
f. Paid employee wages - Cash - Retained earnings -
g. Recorded accrued wages + Wages payable - Retained earnings -
h. Recognized rent expense - Prepaid rent - Retained earnings -

Answer:

See the above - filled table for the effects of each transaction or adjustment on the balance sheet categories and net income.