Nature of transactions Obj. 4 Teri West operates her own catering service. Summary financial data for July are presented in equation form as follows. Each line designated by a number indicates the effect of a transaction on the equation. Each increase and decrease in stockholders’ equity, except transaction (5), affects net income.

Assets 5 Liabilities 1 Stockholders’ Equity Cash 1 Supplies 1 Land 5 Accounts Payable 1 Common Stock 1 Retained Earnings − Dividends 1 Fees Earned − Expenses Bal. 40,000 3,000 82,000 7,500 50,000 67,500

(1) 171,800 171,800

(2) 215,000 115,000

(3) 247,500 −47,500

(4) 11,100 11,100

(5) 25,000 25,000

(6) 24,000 24,000

(7) 21,500 21,500 Bal. 40,300 2,600 97,000 4,600 50,000 67,500 25,000 71,800 249,000

a. Describe each transaction.

b. What is the amount of the net increase in cash during the month?

c. What is the amount of the net increase in stockholders’ equity during the month?

d. What is the amount of the net income for the month?

e. How much of the net income for the month was retained in the business?

AppendixLO1