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Increase Inventory 5,000; increase Accounts Payable 5,000
2. Decrease Inventory 1,500; increase Cash 2,300; increase Retained Earnings 800
3. Decrease Inventory 1,700; increase Accounts Receivable 2,620; increase Retained Earnings 920
(Note that Retained Earnings increases whether or not the proceeds of the sale are received in cash.)
4. Increase Prepaid Insurance 1,224; decrease Cash 1,224
(Note that current practice is to treat this as a current asset even though the policy is in effect three years; the basis is materiality.)
5. Increase Land 24,000; decrease Cash 6,000; increase Mortgage payable 18,000
(In view of what happens subsequently, it can be argued that the land is a current asset, or that $12,000 of it is...
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