P2-39. Analyzing Transactions Using Financial Statement Effect Template (LO3) Se

Question

P2-39. Analyzing Transactions Using Financial Statement Effect Template (LO3)

Sefcik Company began operations on the first of October. Following are the transactions for its first month of business.

1. S. Sefcik launched Sefcik Company and invested $50,000 into the business in exchange for common stock. The company borrowed $100,000 from a local bank.

2. Sefcik Co. purchased equipment for $95,000 cash and purchased inventory of $40,000 on credit (the company still owes its suppliers for the inventory at month-end).

3. Sefcik Co. sold inventory costing $30,000 for $50,000 cash.

4. Sefcik Co. paid $12,000 cash wages owed employees for October work.

5. Sefcik Co. paid interest on the bank loan of $1,000 cash.

6. Sefcik Co. recorded $500 of depreciation expense related to its equipment.

7. Sefcik Co. paid a dividend of $2,000

Required

a. Record the effects of each transaction using the financial statement effects template.

b. Prepare the income statement and balance sheet at the end of October.

Explanation / Answer

Assets = liabilities + capital

Income = Revenue - expenses

Income statement of Sefcik Co as of October 31

Assets = Liabilites Contributed capital Earned capital Revenue Exepense Net income Cash Non cash invested $50,000 into the business in exchange for common stock. The company borrowed $100,000 from a local bank. $       150,000 $     100,000 $                50,000 purchased equipment for $95,000 cash and purchased inventory of $40,000 on credit $        (95,000) $     135,000 $      40,000 sold inventory costing $30,000 for $50,000 cash. $         50,000 $     (30,000) $          20,000 $     50,000 $     30,000 $     20,000 paid $12,000 cash wages owed employees for October work. $        (12,000) $         (12,000) $     12,000 $    (12,000) paid interest on the bank loan of $1,000 cash. $          (1,000) $          (1,000) $      1,000 $     (1,000) recorded $500 of depreciation expense related to its equipment. $          (500) $             (500) $         500 $        (500) paid a dividend of $2,000 $          (2,000) $          (2,000) $      2,000 $     (2,000) Total $         90,000 $     104,500 $     140,000 $                50,000 $           4,500 $     50,000 $     45,500 $      4,500

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