Sheet1

Financial Accounting
*Part One*
A tabular analysis of the transactions made during August 2012 by Nigel Company during its first month of operations is shown below.
Each increase and decrease in stockholders’ equity is explained.
Assets = Liabilities + Stockholders' Liabilities
Retained Earnings
Cash + A/R + Supp. + Equip. - Accounts Payable + Common Stock + Rev. - Exp. - Div.
1 $ 20,000.00 $ 4,000.00 $ 20,000.00 Com. Stock
2 $ (1,000.00) $ 5,000.00
3 $ (750.00) $ 750.00
4 $ 4,100.00 $ 5,400.00 Serv. Rev.
5 $ (1,500.00) $ (1,500.00) $ 9,500.00
6 $ (2,000.00) $ (2,000.00)
7 $ (800.00) $ (800.00) Rent Exp.
8 $ 450.00 $ (450.00)
9 $ (3,000.00) $ (3,000.00) Sale Exp.
10 $ 300.00 $ (300.00) Util. Exp.
Instructions
(a) Describe each transaction.
(b) Determine how much stockholders’ equity increased for the month.
(c) Compute the net income for the month.
(d) Prepare an income statement and a retained earnings statement for August and a classified balance sheet at August 31, 2012.
*Part Two*
Selected transactions for Home Place, an interior decorator corporation, in its first month of business, are as follows.
1. Issued stock to investors for $15,000 in cash.
2. Purchased used car for $10,000 cash for use in business.
3. Purchased supplies on account for $300.
4. Billed customers $3,700 for services performed.
5. Paid $200 cash for advertising start of the business.
6. Received $1,100 cash from customers billed in transaction (4).
7. Paid creditor $300 cash on account.
8. Paid dividends of $400 cash to stockholders.
Instructions
(a) For each transaction indicate (a) the basic type of account debited and credited (asset, liability, stockholders’ equity); (b) the specific account debited and credited (Cash,Rent Expense, Service Revenue, etc.); (c) whether the specific account is increased
or decreased; and (d) the normal balance of the specific account.
****Use the format shown below, in which transaction one(1) is given as an example.****
= Liabilities + Stockholders' Liabilities
Assets Retained Earnings
© (d) (a) (b) (c) (d)
(a) (b) + Effect - Normal Balance + Basic Type + Specific Amount - Effect - Normal Balance
Transactions + Basic Types + Specific Amount Increase Debit Stockholders' equity Common Stock Increase Credit
1 Asset Cash
*Part Three*
Instructions
Journalize the transactions. Do not provide explanations.
The May transactions of StepAside Corporation were as follows.
May
4 Paid $700 due for supplies previously purchased on account.
7 Performed advisory services on account for $6,800.
8 Purchased supplies for $850 on account.
9 Purchased equipment for $1,000 in cash.
17 Paid employees $530 in cash.
22 Received bill for equipment repairs of $900.
29 Paid $1,200 for 12 months of insurance policy. Coverage begins June 1.
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