Problem:
The January 1 balance sheet of the Marvin Company, an unincorporated business, is as follows:
Marvin Company
Balance Sheet
As of January 1
Assets Liabilities and Owners' Equity
Cash $25,000 Notes payable $20,000
Inventory 50,000 Capital 55,000
Total $75,000 Total $75,000
The following transactions took place in January:
Jan 4 Merchandise was sold for $12,000 cash that had cost $7,000.
Jan 6 To increase inventory, Marvin placed an order with Star Company for merchandise that would cost $7,000.
Jan 8 Marvin received the merchandise ordered from Star and agreed to pay the $7,000 in 30 days.
Jan 11 Merchandise costing $1,500 was sold for $2,500 in cash.
Jan 16 Merchandise costing $2,000 was sold for $3,400 on 30 day open account.
Jan 26 Marvin paid employees for the month $4,200 in cash.
Jan 29 Purchased land for $20,000 in cash.
Jan 31 Marvin purchased a two year insurance policy for $2,800 in cash.
Required to do:
Describe the impact of each transaction on the balance sheet, and prepare a new balance sheet as of January 31.