Question

Swizzle, Inc. began operations in November of the current year with the following transactions occurring during the month:

Sep	1	Sold 15,000 common shares for $13 per share.
Sep	2	Paid $6,300 for three months' rent in advance.
	5	Purchased $25,000 of equipment paying 25% down and agreeing to pay the balance in two years.
Sep	6	Purchased inventory for $19,000 on credit.
Sep	10	Sold on account $16,000 of inventory for $23,000.
Sep	15	Paid wages of $1,200.
Sep	20	Collected $8,000 from customers on account.
Sep	25	Paid suppliers $3,000 on account.
Sep	31	Paid wages of $1,100.
Sep	31	Recognized one month's rent expense.
Sep	31	Recognized one month's equipment depreciation expense. The estimated salvage value is $4,000 and the estimated useful life is 5 years.

Required:

Explain the impact of each transaction on the fundamental accounting equation, using the following format:

Transaction: August 1, Obtained a bank loan totaling $100,000

Example answer:

August 1:

• Cash (asset) increases by $100,000
• Bank Loan (liability) increases by $100,000

Make sure you specify the following:

The account(s) affected, the amount, whether it increases or decreases, and whether it is an asset, liability, equity, revenue or expense. For any amounts that are on the income statement, you should use the specific account (i.e. revenue, cost of goods sold, salaries expense, etc.).

Answer 1

	Assets									=	Liabilities			+	Shareholders’Equity
Date	Cash	+	Accounts Receivable	+	Inventory	+	Prepaid Rent	+	Equipment	=	Accounts Payable	+	Notes Payable	+	Common Stock	+	Retained Earnings
1	195,000														195,000
2	(6,300)						6,300
5	(6,250)								25,000				18,750
6					19,000						19,000
10			23,000														23,000
10					(16,000)												(16,000)
15	(1,200)																(1,200)
20	8,000		(8,000)
25	(3,000)										(3,000)
31	(1,100)																(1,100)
31							(2,100)										(2,100)
31									(350)								(350)
Total	185,150		15,000		3,000		4,200		24,650		16,000		18,750		195,000		2,250