Transaction analysis and calculating net income (Learning Objective 5)

5–10 min.

The analysis of Cunnington, Inc.’s first seven transactions follows. The business only sold stock once and paid no dividends.

1. Label each of the transactions in the preceding analysis with the corresponding letter of the description that best fits it:

a. Earned revenue for services provided, but customer will pay later.

b. Customers paid cash for services completed earlier in the month.

c. Received cash for revenue earned by providing services.

d. Paid cash for expenses incurred to operate the business.

e. Paid cash to purchase equipment.

f. Sold stock to start the business.
g. Purchased equipment with a bank loan.
2. If these transactions fully describe the operations of Cunnington, Inc., during the month, what was the amount of its net income or net loss?AppendixLO1

Transcribed Image Text:

Cash + $40,000 Assets Accounts + Receivable Equipment 1. 2. 6,000 3. 4. 5. 1,350 6. + 1,750 7. + 350 + $1,200 - 350 Liabilities Stockholders' Equity = Accounts Payable Notes Common Retained Payable + Stock + Earnings + $40,000 + $ 6,000 = + 15,000 + $15,000 = + 1 + 1,200 1,350 1,750