Question

The Draper Company Records these journal entries:

Purchase of equipment; signed a 5-year note payable $27

Accrued Wages Payable $12

Earned portion of Unearned Revenue $16

Required: Indicate the net effect of these journal entries on the following items. Indicate the dollar amount of the effect and the direction of the effect. (Example: $13 Increase, or $8 Decrease, or NO EFFECT)

a) Net Income $_______________ b) Total Assets $_______________ c) Total Liabilities $_______________

d) Retained Earnings $_______________ e) Total Equity $_______________ f) Working Capital $_______________

Answer 1

Solution:
	NET INCOME
	Earned Revenue	$                             16
	Less: Accrued Wages	$                             12
	NET INCOME	$                               4
	Answer = Net income = $ 4 Incrased
Solution: 2
	Total Assets
	Purchase of Equipment	$                             27
	Answer = $ 27 Increase
Solution: 3
	Total Liabilities:
	Note Payable	$                             27
	Wages Payable	$                             12
	Total	$                             39
	Answer = Total Liabilitis $ 39 Increases
Solution: 4
	Retained Earnings:
	Retained Earnings is equal to net income =	$                               4
	Answer = Retained Earnings $ 4 Increases
Solution: 5
	Total Equity :
	Total Equity is equals to retained Earnings =	$                               4
	Answer = Total Equity $ 4 Increases
Solution: 6
	Working Capital = Current Assets - Current Liabilties
	Working Capital = $ 0 - $ 12
	Working Capital = - $ 12
	Answer = Working Capital = $ 12 Decreases