Problem 7

Sara Obermeyer decides to open a pizza parlor near the local college campus that will operate as a corporation. Analyze the following transactions for the month of June in terms of their effect on the basic accounting equation. Record each transaction by increasing (+) or decreasing () the dollar amount of each item affected. Indicate the new balance of each item after a transaction is recorded. It is not necessary to identify the cause of changes in stockholders equity.

Transactions

(1) Sara Obermeyer invests $25,000 cash in exchange for common stock to start a pizza parlor business on June 1.

(2) Purchased equipment for $4,000 paying $2,000 in cash and the remainder due in 30 days.

(3) Purchased supplies for $1,200 cash.

(4) Received a bill from Campus News for $200 for advertising in the campus newspaper.

(5) Cash receipts from customers for pizza sales amounted to $1,500.

(6) Paid salaries of $200 to employees.

(7) Billed the Tiger Football Team $300 for pizzas ordered.

(8) Paid $200 to Campus News for advertising that was previously billed in Transaction 4.

(9) Sara Obermeyer was paid dividends of $1,200.

(10) Incurred utility expenses for month on account, $100.

Trans- Accounts Accounts Common Retained

action Cash + Receivable + Supplies + Equipment = Payable + Stock + Earnings

(1)

_____________________________________________________________

Balance

(2)

_____________________________________________________________

Balance

(3)

_____________________________________________________________

Balance

(4)

_____________________________________________________________

Balance

(5)

_____________________________________________________________

Balance

(6)

_____________________________________________________________

Balance

(7)

_____________________________________________________________

Balance

(8)

_____________________________________________________________

Balance

(9)

_____________________________________________________________

Balance

(10)

_____________________________________________________________

Totals