Interpreting the Effects of Business Transactions

Six transactions of Prosperity Company, a corporation, are summarized as follows in equation form, with each of the six transactions identified by a letter. For each of the transactions (a) through (f) write a separate statement explaining the nature of the transaction. For example, the explanation of transaction (a) could be as follows: Purchased furniture for cash at a cost of $800.

Assets = Liabilities + Owners' Equity Cash + Accounts Receivable + Furniture + Building + Land = Accounts Payable + Capital Stock Balances $30,000 $90,000 $40,000 $30,000 $149,000 $10,000 +800 $10,800 $30,000 $90,000 $40,000 $30,000 $149,000 Balances (b) Balances -500 $29,500 $90,000 $40,000 $149,000 (c) $ 9,000 -800 $ 8,200 +500 $ 8,700 -3,000 $ 5.700 -2,000 $ 3.700 +10,000 $13,700 $10,800 +5,000 $15,800 $29,500 $90,000 $40,000 $30,000 +2,000 $32,000 -2,000 $30,000 Balances (d) Balances (e) Balances $149,000 $29,500 $15,800 $90,000 $40,000 $149,000 +10,000 $159,000 $29,500 $90,000 $40,000 $15,800 +3,000 $18,800 $30,000 +3,000 $33,000 Balances $13,700 $29,500 $90,000 $40,000 $159,000