A tabular analysis of the transactions made during August, 2001 by Downtown Company during its first month of operations is shown below. Each increase and de-

(SO 1) crease in stockholders’ equity is explained.

Instructions Prepare an income statement, retained earnings statement, and balance sheet.
(SO 1)
Identify debits, credits, and normal balances.
(SO 3)

(a) Describe each transaction.

(b) Determine how much stockholders’ equity increased for the month.

(c) Compute the net income for the month.

Transcribed Image Text:

Accounts Office + Receivable + Supplies + Equipment = Accounts Payable + Stockholders' Equity +$15,000 Issued common stock Cash 1. +$15,000 2. -2,000 3. -750 +$750 4. +4,600 +$3,400 5. -1,500 6. -2,000 7. -650 8. +450 -450 9. -2,900 10. +$5,000 +$3,000 +8,000 Service Revenue -1,500 -2,000 Dividends -650 Rent Expense +500 -2,900 Salaries Expense -500 Utilities Expense