The Following Transactions Apply to Einstein Corporation

question 85

Essay

The following transactions apply to Einstein Corporation.Issued common stock for $50,000 cash.Provided services to customers for $28,000 on account.Purchased land for $16,000 cash.Purchased $1,500 of supplies on account.Paid $12,000 for operating expenses.Paid $550 on accounts payable.Collected $25,000 cash from customers.Accrued $600 of salary expense at year end.Paid $2,000 dividends to stockholders.Required:Identify the effect on the statement of cash flows for each of the above transactions.Classify the above accounting events into one of four types of transactions (asset source, asset use, asset exchange, claims exchange).

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Definitions:

Dividends

The allocation of a corporation's earnings to its shareholders, in the form of monetary distributions.

Retained Earnings

The portion of a company's profits that are kept or retained within the company to reinvest in the business or pay down debt, rather than distributed to shareholders as dividends.

Tax Liability

The total amount of tax owed to the tax authorities by an individual, organization, or corporation in a given period.

Excluded From Taxation

Income, transactions, or entities that are not subject to tax by law or specific tax policy.