Revise your worksheet to the accounting equation and update for
the new transaction values below, and then answer the questions
that follow.
The following transactions took place at a newly formed
company:
1
Started the company by issuing common stock
$
52,800
2
Paid six months of rent in advance
8,800
3
Provided services to customers on account
17,000
4
Purchased supplies on account
3,800
5
Paid employees’ salaries for the current month
7,800
6
Paid dividends to stockholders
5,800
Required:
1. Based on your new values, enter the total of Assets,
Liabilities, and Stockholders’ Equity:
2. What statement below is true regarding the effect of incorrectly
including the issuance of Common Stock in the Retained Earnings
column instead of the Asset column?
a) There will no effect as Assets still equal Liabilities plus
Stockholder's Equity.
b) Assets and Retained Earnings will be overstated, the
accounting equation will be in balance.
c) Assets will be understated and Stockholder's Equity will be
overstated.
d) Both Assets and Stockholder's Equity will be understated.
3-a. What would be the amount of total Assets and total Retained
Earnings if the payment of dividends weren't made?