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    Indicate the effects of the transaction

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    Indicate the effects of the transaction on each of the following: net profit, retained earnings, total stockholders' equity. Use + to indicate an increase, - to indicate a decrease, and 0 to indicate no effect
    (1) A stock dividend is declared and paid
    (2) Merchandise is purchased on credit
    (3) Marketable securities are sold above cost
    (4) Account receivable are collected
    (5) A cash dividend is declared and paid
    (6) Treasury stock is purchased and recorded at cost
    (7) Treasury stock is sold above cost
    (8) Common stock is sold
    (9) A fixed asset is sold for less than book value
    (10) Bonds are converted into common stock

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    Indicate the effects of the transaction on each of the following: net profit, retained earnings, total stockholders' equity. Use + to indicate an increase, - to indicate a decrease, and 0 to indicate no effect
    (1) A stock dividend is declared and paid: It results in reduction of Retained earning only. Total stock holders' equity does not change.
    (2) Merchandise is purchased on credit: Account payable is increased and inventory is also increased. Revenue accounts not affected, therefore no change in Net income, Retained earnings and Owners equity.
    (3) Marketable securities are sold above cost: Profit on sale comes under other revenues in ...

    Solution Summary

    The effects of the transactions are indicated.

    $2.19

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