Indicate how each event affects the elements of financial statements. Use the following letters to record your answer in the box shown below each element. You do not need to enter amounts. Assume that Frank Company uses a perpetual inventory system.Increase = I Decrease = D No Effect = NA(Note that "No Effect" means that the event does not effect that element of the financial statements or that the event causes an increase in that element that is offset by a decrease in that same element.) Wetzel Co. sold merchandise to a customer for $1,400 cash. The merchandise had originally cost Wetzel $850. (Consider the effects of both parts of this event.)AssetsLiabilitiesStk. EquityRevenuesExpensesNet IncomeStmt of Cash Flows???????
What will be an ideal response?
(I) (NA) (I) (I) (I) (I) (I)
Recording the sale increases assets (cash) and increases stockholders' equity (retained earnings) by $1,400. Sales revenue and net income increase by the same amount. Recording the cost of the merchandise sold decreases assets (merchandise inventory) and decreases stockholders' equity (retained earnings) by $850. The expense (cost of goods sold) increases and net income decreases by that same amount. The net effect on assets and stockholders' equity is an increase to each of $350 (or $950 ? $600). The transaction is reported as a $1,400 cash inflow from operating activities.
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Which of the following entries ensures the proper separation of revenues and expenses between successive accounting periods?
a. adjusting; b. closing; c. reversing; d. general journal; e. purchasing.
At the beginning of the year, Sigma Company's balance sheet reported Total Assets of $231,000 and Total Liabilities of $17,800 and Total Paid-in capital of $71,200. During the year, the company reported total revenues of $270,000 and expenses of $209,000. Also, dividends during the year totaled $56,000. Assuming no other changes to Retained earnings, the balance in the Retained earnings account at the end of the year would be:
A. $200,000. B. $147,000. C. $230,000. D. $141,000. E. $144,000.
How can a company leverage economies of scale to its benefit?
What will be an ideal response?
Aggarwal Inc. buys on terms of 2/10, net 30, and it always pays on the 30th day. The CFO calculates that the average amount of costly trade credit carried is $350,000. What is the firm's average accounts payable balance? Assume a 365-day year.
A. $425,250 B. $504,000 C. $525,000 D. $556,500 E. $514,500