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Morris inc. had the following transactions take place during the month of April 2006, in its first month of operations:

Received $10,000 cash from the sale of common stock
Earned and received revenue of $20,500 cash
Paid one month rent on office space for $3000 cash
Purchased office equipment for $12,000 on credit

Based on the transactions that occured during the month of April, what amount of assets will be reported on the balance sheet as of April 30th 2006

a.$15,500
b.$17,500
c.$ 39,500
d.$20,500

39,500

Since the company just started, there are no beginning asset balances.

The common stock sales gives you 10,000 cash, an asset.
The revenue gives you 20,500 cash, also an asset.
Paying for expenses using cash reduces your assets by 3000.
Buying 12,000 of equipment on credit increases assets because a liability was used to purchase, not an asset (cash).

Thus, 10,000+20,500-3000+12,000 = 39,500.

The answer is c

The 10000 cash is an asset
The 20500 cash for revenue is an asset
Minus the 3000 cash for rent
And the 12000 equipment is an asset

+10,000 cash received
+20,500 cash received
-3,000 cash paid
+12,000 office equipment (fixed asset)
-----------
39,500 total assets (C)

Let us do the accounting entries per transaction:

1. Received $10,000 cash from the sale of common stock

(Debit) Cash 10,000
(Credit) Common Stock 10,000

2. Earned and received revenue of $20,500 cash
(Debit) Cash 20,500
(Credit) Revenue 20,500

3. Paid one month rent on office space for $3000 cash
(Debit) Rent Expense 3,000
(Credit) Cash 3,000

4. Purchased office equipment for $12,000 on credit
(Debit) Office Equipment 12,000
(Credit) Accounts Payable 12,000

Basically, A Debit Increases Asset while a Credit Decreases it. From the transactions above, the Assets mentioned were Cash & Office Equipment only.

Movements in cash:
Debits = 10,000 (item 1) & 20,500 (item 2) TOTAL 30,500.
Credits = 3,000 (item 3)

Net Effect to Cash = 30,500 - 3,000
= 27,500

Movement in Office Equipment:
Debit = 12,000

TOTAL Assets (Cash & Office Equipment) = 27,500 + 12,000
= 39,500
Answer: letter C