Otto Egan operates his own catering service. Summary financial data for August are presented in equation form as follows. Each line designated by a number indicates the effect of a transaction on the equation. Each increase and decrease in owner’s equity, except transaction (5), affects net income.
|
|
Assets |
|
|
= Liabilities + |
|
Owner’s Equity |
|
|
|
|
|
|
Accounts |
Otto Egan, |
Otto Egan, |
Fees |
|
|
|
|
Cash + |
Supplies+ |
Land = |
= Payable + |
Capital |
Drawing + |
Earned |
Expenses |
|
Bal. |
27,000 |
3,000 |
100,000 |
15,000 |
115,000 |
|
|
|
|
1. |
+45,000 |
|
|
|
|
|
45,000 |
|
|
2. |
20,000 |
|
+20,000 |
|
|
|
|
|
|
3. |
16,000 |
|
|
|
|
|
|
–16,000 |
|
4. |
|
+3,000 |
|
+ 3,000 |
|
|
|
|
|
5. |
5,000 |
|
|
|
|
–5,000 |
|
|
|
6. |
12,000 |
|
|
12,000 |
|
|
|
|
|
7. |
|
2,500 |
|
|
|
|
|
–2,500 |
|
Bal. |
19,000 |
3,500 |
120,000 |
6,000 |
115,000 |
–5,000 |
45,000 |
–18,500 |
a. Describe each transaction.
b. What is the amount of net decrease in cash during the month?
c. What is the amount of net increase in owner’s equity during the month?
d. What is the amount of the net income for the month?
e. How much of the net income for the month was retained in the business?