Identify the impact on the accounting equation, if and how it affects net income
ID: 2610881 • Letter: I
Question
Identify the impact on the accounting equation, if and how it affects net income, and if and how it affects cash.
Using the following as an example: Purchased merchandise inventory for cash: assets: + inventory and - cash; no effect on liabilities or equity; no effect on net income, - cash
Please explain the reasoning and how to solve the problem.
1. Paid cash for selling and administrative expenses.
2. Paid cash on accounts payable not within the discount period.
3. Paid cash for transportation-in.
4. Collected cash from accounts receivable.
5. Paid cash for transportation-out.
Explanation / Answer
Paid cash for selling and administrative expenses Cash Decrease no effect on liabilities or equity Net Income Decrease Paid cash on accounts payable not within the discount period. Cash Decrease Liabilities decrease -Account Payable Decrease no effect on net income Paid cash for transportation-in. Inventory increase & Cash Decrease no effect on liabilities or equity no effect on net income Collected cash from accounts receivable. Cash Increase & Account Receivable Decrease no effect on liabilities or equity no effect on net income Paid cash for transportation-out Cash Decrease no effect on liabilities or equity Net Income Decrease