The Marchetti Soup Company entered into the following transactions during the mo

Question

The Marchetti Soup Company entered into the following transactions during the month of June: (1) purchased inventory on account for $160,000 (assume Marchetti uses a perpetual inventory system); (2) paid $43,000 in salaries to employees for work performed during the month; (3) sold merchandise that cost $126,000 to credit customers for $215,000; (4) collected $195,000 in cash from credit customers; and (5) paid suppliers of inventory $140,000.

Analyze each transaction and show the effect of each on the accounting equation for the corporation. (Amounts to be deducted should be indicated by a minus sign. Enter the net change for items which affect more than one account in an account category (i.e., assets, liabilities, etc.))

Assets = Liabilities + Paid in Capital + Retained earnings

The Marchetti Soup Company entered into the following transactions during the month of June: (1) purchased inventory on account for $160,000 (assume Marchetti uses a perpetual inventory system); (2) paid $43,000 in salaries to employees for work performed during the month; (3) sold merchandise that cost $126,000 to credit customers for $215,000; (4) collected $195,000 in cash from credit customers; and (5) paid suppliers of inventory $140,000.

Explanation / Answer

Assets = Liabilities + Equity Revenue - Expense = Net Income Stock + Cash + AR AP Common Stock + Retained Earnings 160000 0 0 160000 0 0 0 0 0 0 -43000 0 0 0 -43000 0 43000 -43000 -126000 0 215000 0 0 89000 89000 0 89000 0 195000 -195000 0 0 0 0 0 0 0 -140000 0 -140000 0 0 0 0 0 0 34000 12000 20000 20000 0 46000 89000 43000 46000

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