Reference no: EM133010798

Rahal and Watson, a small manufacturing company, entered into the following cash transactions during January 2020:

• Issued 800 shares of common stock for $30 each.
• Collected $3,900 on outstanding accounts receivable.
• Paid payroll for the month of January of $1,530.
• Purchased property for $12,000 cash.
• Paid a $6,000 dividend.
• Sold an equipment with a book value of $5,000 for $7,000 cash.
• Paid $2,000 to the bank: $900 to reduce the principal on an outstanding loan and $1,100 as an interest payment for interest incurred during the month of January.
• Paid $5,000 for miscellaneous expenses incurred during the month of January.

Problem 1: Prepare a journal entry for each transaction. Indicate the classification and the effect on the accounting equation.

Problem 2: Create a cash T-account and compute the company's cash balance as of the end of January. Assume a beginning balance of $4,000.