a. Explanation 1. The owner investment of $900 in cash, it will increase cash balance, so asset will increase and equity of the company is also increase by $900. No effect on income statement. Thus, asset and equity of the company increases and no effect on income. 2. The company provided services to the client of $700; the cash balance increases, so asset of the company increases and revenue account increases ultimately equity of the company increases. Sales revenue of the company increases and there is increase in net income of the company. Thus, asset and equity of the company increases and net income of the company also increases. 3. Payment of $500 to employee's as wages reduce cash balance, so asset decreases and it is an expense of the company that reduces income of the company. Ultimately the equity of the company decreases. Wage payment is the expense of the company by this the income of the company reduces by$500. Thus, asset and equity of the company decreases and net income of the company decreases. 4. Legal expense on credit, increase the liability as accounts payable account increases, decrease the equity because legal expense is an expense that reduces the income so equity of the company reduces. Legal expense is the expense of the company by this the income of the company reduces by $100. Thus, increases the liabilities and decreases the equity and net income of the company decreases. 5. Purchase of supplies worth $200 on credit basis, increase the liability as accounts payable account increases, increase the supplies account so asset of the company increases. No effect on income statement... b. To determine To identify: The type of cash flow activity.

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ISBN: 9781260482867

Author: Wild

Publisher: MCG

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Chapter 1, Problem 1PSA

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To explain: The effect of transaction on assets, liabilities and on equity. And also effect on income statement

To determine

To identify: The type of cash flow activity.

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Chapter 1, Problem 23E

Chapter 1, Problem 2PSA

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Chapter 1 Solutions

FINANCIAL ACCT.FUND.(LOOSELEAF)

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The effect of transaction on assets, liabilities and on equity. And also effect on income statement

Solution Summary: The author explains that the balance sheet shows the financial position of a company as from where the company receives the money and to whom it has to pay.

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To explain: The effect of transaction on assets, liabilities and on equity. And also effect on income statement

To identify: The type of cash flow activity.

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Chapter 1 Solutions