Practice the following: Assume the entity is using U.S. GAAP, accrual-basis accounting.
For each of the following independent situations, determine the effect of that transaction on: net income; cash; total assets; total liabilities. Complete the primer exercise by filling in the chart, showing in each area either I (increase), D (decrease), or NE (no effect). Do not leave any area blank! Each situation is independent unless indicated.
1) Net Income
2) Cash
3) Total Assets
4) Total Liability
5) Buy inventory for cash
6) Exchange land for land(fair value = book value)
7) Equipment impaired
8) Equipment up in value
9) Acquire land for cash
10) Depreciation expense
11) Buy building for cash plus a note
12) Paid legal fees to set up corporation
13) Received insurance more than fire loss
14) Collect an account receivable.