Question

Identify how each of the following separate transactions 1 through 10 affects financial statements. For increases, place a “+” and the dollar amount in the column or columns. For decreases, place a “−” and the dollar amount in the column or columns. Some cells may contain both an increase (+) and a decrease (−) along with dollar amounts. The first transaction is completed as an example.

Required

(a) For the balance sheet, identify how each transaction affects total assets, total liabilities, and total equity. For the income statement, identify how each transaction affects net income

Transaction Assets Liab. Equity IncomeStatement

1 Owner invests \(900 cash in business in exchange for stock +900 +900 +900

2 Receives \)700 cash for services provided

3 Pays \(500 cash for employee wages

4 Incurs \)100 legal costs on credit

5 Purchases \(200 of supplies on credit

6 Buys equipment for \)300 cash

7 Pays \(200 on accounts payable

8 Provides \)400 services on credit

9 Pays \(50 cash for dividends

10 Collects \)400 cash on accounts receivable

Short answer

Income statement refers to the financial statement which shows the net income and the required table is prepared.

Step-by-step solution

Definition of Income Statement

The income statement is the financial statement that reports income generated and expenses incurred during the year.

Changes in the balance sheet and income statement