Question

The following amounts summarize the financial position of Martin Resources, Inc., on May 31, 2012:

Assets =Liabilities +Stockholders’ EquityCash +Accounts Receivable + Supplies + Land =Accounts Payable  +Common Stock +Retained EarningsBal1,4001,30011,6008,0003,5002,800\begin{matrix} \quad & \quad & \quad & \text{Assets} & \quad & \quad & \quad & \quad & \text{ =} & \text{Liabilities} & \text{ +} & \text{Stockholders’ Equity} & \quad\\ \quad & \text{Cash} & \text{ +} & \text{Accounts Receivable} & \text{ +} & \text{ Supplies} & \text{ + } & \text{Land} & \text{ =} & \text{Accounts Payable } & \text{ +} & \text{Common Stock} & \text{ +} & \text{Retained Earnings}\\ \text{Bal} & \text{1,400} & \quad & \text{1,300} & \quad & \quad & \quad & \text{11,600} & \quad & \text{8,000} & \quad & \text{3,500} & \quad & \text{2,800}\\ \end{matrix}

During June 2012, Martin Resources completed these transactions: a. The business received cash of $9,000 and issued common stock. b. Performed services for a customer and received cash of$6,800. c. Paid $4,700 on accounts payable. d. Purchased supplies on account,$1,200. e. Collected cash from a customer on account, $400. f. Consulted on the design of a computer system and billed the customer for services rendered,$2,400. g. Recorded the following business expenses for the month: (1) paid office rent—$1,400; (2) paid advertising—$900. h. Declared and paid a cash dividend of $1,700. Analyze the effects of the preceding transactions on the accounting equation of Martin Resources, Inc. Prepare the income statement of Martin Resources, Inc., for the month ended June 30, 2012. List expenses in decreasing order by amount. Prepare the entity’s statement of retained earnings for the month ended June 30, 2012. Prepare the balance sheet of Martin Resources, Inc., at June 30, 2012.

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In this problem, we are asked to analyze the effect of the transactions on the accounting equation of Martin Resources Inc.

The following are the beginning balance of the company's accounts:

Assets  Cash1,400 Accounts receivable1,300 Supplies Land11,600 Liabilities  Accounts payable8,000 Stockholders’ Equity  Common stock3,500 Retained earnings2,800 \begin{array}{l r r r} \textbf{Assets} & & \\\ \ \text{Cash} & 1,400 \\\ \text{Accounts receivable} & 1,300 \\\ \text{Supplies} & \\\ \text{Land} & 11,600 \\\ \\ \textbf{Liabilities} \\\ \ \text{Accounts payable} & 8,000 \\\ \\ \\ \textbf{Stockholders' Equity} \\\ \ \text{Common stock} & 3,500 \\\ \text{Retained earnings} & 2,800 \\\ \end{array}

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From the September 30 Bank StatementPREVIOUS BALANCETOTAL CHECKS AND DEBITSTOTAL DEPOSITS AND CREDITSCURRENT BALANCE16,800.459,620.0511,272.8518,453.25\begin{matrix} \text{From the September 30 Bank Statement}\\ \text{PREVIOUS BALANCE} & \text{TOTAL CHECKS AND DEBITS} & \text{TOTAL DEPOSITS AND CREDITS} & \text{CURRENT BALANCE}\\ \text{16,800.45} & \text{9,620.05} & \text{11,272.85} & \text{18,453.25}\\ \end{matrix}

CHECKS AND DEBITS DEPOSITS AND CREDITSDateNoAmountDateAmount09/0358881,028.0509/051,103.7509/045902719.9009/122,226.9009/0759011,824.2509/214,093.0009/17600.25 NSF09/252,351.7009/205905937.0009/3012.50 IN09/225903399.1009/301,485.00 CM09/2259042,090.0009/285907213.8509/2959091,807.65\begin{matrix} \text{CHECKS AND DEBITS} & \quad & \quad & \text{ DEPOSITS AND CREDITS}\\ \text{Date} & \text{No} & \text{Amount} & \text{Date} & \text{Amount}\\ \text{09/03} & \text{5888} & \text{1,028.05} & \text{09/05} & \text{1,103.75}\\ \text{09/04} & \text{5902} & \text{719.90} & \text{09/12} & \text{2,226.90}\\ \text{09/07} & \text{5901} & \text{1,824.25} & \text{09/21} & \text{4,093.00}\\ \text{09/17} & \quad & \text{600.25 NSF} & \text{09/25} & \text{2,351.70}\\ \text{09/20} & \text{5905} & \text{937.00} & \text{09/30} & \text{12.50 IN}\\ \text{09/22} & \text{5903} & \text{399.10} & \text{09/30} & \text{1,485.00 CM}\\ \text{09/22} & \text{5904} & \text{2,090.00}\\ \text{09/28} & \text{5907} & \text{213.85}\\ \text{09/29} & \text{5909} & \text{1,807.65}\\ \end{matrix}

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