A tabular analysis of the transactions made during August 2012 by Nigel Company

Question

A tabular analysis of the transactions made during August 2012 by Nigel Company
during its first month of operations is shown below. Each increase and decrease in
stockholders’ equity is explained.

Assets Liabilities Stockholders’ Equity
Accounts Common Retained Earnings
Cash A/R Supp. Equip. Payable Stock Rev. Exp. Div.
1. $20,000 $20,000 Com. Stock
2. 1,000 $5,000 $4,000
3. 750 $750
4. 4,100 $5,400 $9,500 Serv. Rev.
5. 1,500 1,500
6. 2,000 $2,000 Div.
7. 800 $ 800 Rent Exp.
8. 450 450
9. 3,000 3,000 Sal. Exp.
10. 300 300 Util. Exp.




Instructions
(a) Describe each transaction.
(b) Determine how much stockholders’ equity increased for the month.
(c) Compute the net income for the month.

Explanation / Answer

b). Equity is increased by owner investments (sale of stock) and revenues. Equity is decreased by owner draws (dividends) and expenses. c). Revenues - Expenses = Net Income

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