# Accounting What the Numbers Mean: P2-16 Stacy-Ann Kelly owns and operates Kelly’s Furniture

Accounting What the Numbers Mean
P2-16 Transaction Analysis - Quantitative; analyze results
Stacy-Ann Kelly owns and operates Kelly’s Furniture Emporium, Inc. The balance sheet totals for assets, liabilities, and stockholder’s equity at August 1, 2013, are as indicated. Described here are several transactions entered into by the company throughout the month of August.

Required:
a. Indicate the amount of each transaction on total assets, total liabilities, and total stockholder’s equity, and then compute the new totals for each category. The first transaction is provided as an illustration.(Negative amounts should be indicated by a minus sign.)
Assets Liabilities Stockholders' Equity
August 1, 2013 totals 355,000 291,000 64,000
August 3, borrowed \$12,000 in cash from the bank 12,000 12,000
New totals 367,000 291,000 76,000
August 7, bought merchandise inventory valued at \$19,000 on account
New totals
August 10, paid \$7,000 cash for operating expenses
New totals
August 14, received \$50,000 in cash from sales of merchandise that had cost \$33,000

New totals
August 17, paid \$14,000 owed on accounts payable
New totals
August 21, collected \$17,000 of accounts receivable
New totals
August 24, repaid \$10,000 to the bank plus \$200 interest
New totals
August 29, paid Stacy-Ann Kelly a cash dividend of \$5,000
August 31, 2013 totals

b. What was the amount of net income (or loss) during August? How much were total revenues and total expenses during August?
c. What were the net changes during the month of August in total assets, total liabilities, and total stockholders' equity?
d. Explain to Stacy-Ann Kelly which transactions caused the net change in her stockholders' equity during August.
e. Explain why dividend payments are not an expense, but interest is an expense.
f. Explain why the money borrowed from the bank increased assets but did not increase net income.
g. Explain why paying off accounts payable and collecting accounts receivable do not affect net income.