1. Issued 30,000 shares of common stock in exchange for $300,000 in cash. 2. Purchased equipment at a cost of $40,000. $10,000 cash was paid and a notes payable to the seller was signed for the balance owed.
3. Purchased inventory on account at a cost of $90,000. The company uses the perpetual inventory system.
4. Credit sales for the month totaled $120,000. The cost of the goods sold was $70,000.
5. Paid $5,000 in rent on the warehouse building for the month of March.
6. Paid $6,000 to an insurance company for fire and liability insurance for a one-year period beginning April 1, 2021.
7. Paid $70,000 on account for the merchandise purchased in 3.
8. Collected $55,000 from customers on account.
9. Recorded depreciation expense of $1,000 for the month on the equipment.
Required:
Analyze each transaction and show the effect of each on the accounting equation for a corporation.

Solution :

       Assets          =   Liabilities   +   Paid in capital   +   retained earnings

1.   $ 300,000                                  $ 300,000

2.   $ 30,000             $ 30,000

3.   $ 90,000             $ 90,000

4.   $ 50,000                                                                        $ 50,000

5.   $ 5,000                                                                          $ 5,000

6.   $ 6,000                                                                          $ 6,000

7.   $ 70,000            $ 70,000        

8.      --

9.    $ 1,000                                                                          $ 1,000

Point 4 -- the accounts receivable will increase by $ 120,000 due to the credit sales and the cost of goods sold.

Point 6 -- Adjustments entry at the year end for 3 months from January to March 2022 should be reduced from both assets and retained earnings and the adjusted amount would be $ 4500.

Point 8 -- No impact as the cash is collected against the account receivable and both are assets.

answerservice script;