Rahal and Watson, a small manufacturing company, entered into the following cash transactions during January of f2012:
1. Issued 800 shares of common stock for $30 each.
2. Collected $3,900 on outstanding accounts receivable.
3. Paid wages for the month of January of $1,530.
4. Purchased land as a long-term investment for $12,000 cash.
5. Paid a $6,000 dividend.
6. sold a piece of equipment with a book value of $5,000 for $7,000 cash.
7. Paid $2,000 to the bank: $900 to reduce the principal on an outstanding loan and $1,100 as an interest payment.
8. Paid miscellaneous expenses of $5,000.
a. Prepare a journal entry for each transaction. Indicate the classification and the effect on the accounting equation.
b. Prepare a cash T-account and compute the company?s cash balance as of the end of January. Assume a beginning balance of $4,000.
c. Prepare a statement of cash flows (direct method) for the month of January.
This question was answered on: Jul 11, 2017
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