Phelps Company Entered into the Following Transactions During Year 1

question 118

Essay

Phelps Company entered into the following transactions during Year 1:
1)Provided services to customers for cash, $70,0002)Purchased land by paying cash, $32,0003)Paid rent in advance for 6 months, $24,0004)Acquired cash of $50,000 by issuing common stock5)Purchased supplies on account, $5,4006)Receive payment of $6,000 from a customer for services that will be provided over the next six months.
Required:a)Prepare journal entries for each of the preceding transactions.
b)Show how each transaction affects the financial statements by inserting the related dollar amounts. Precede each amount with a plus sign ("+")if the transaction increases, a minus sign ("−")if the transaction decreases, or "NA" if the transaction does not affect a given element of the financial statements.In the last column, use the letters "OA" for operating activities, "IA" for investing activities, and "FA" for financing activities, or "NA" if the statement of cash flows is not affected.

---

Definitions:

Market Equilibrium

A situation in a market where the quantity supplied equals the quantity demanded at a certain price point.

Price Floor

A government or group-imposed price control or limit on how low a price can be charged for a product, service, or commodity, usually intended to ensure fair conditions for producers.

Shortage/Surplus

A market condition where the quantity demanded exceeds the quantity supplied (shortage) or where the quantity supplied exceeds the quantity demanded (surplus).

Price Floor

A price floor is a government- or group-imposed price control or limit on how low a price can be charged for a product, often above the equilibrium price.