Basic accounting equations

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Week One Exercise Assignment
Basic Accounting Equations

1. Recognition of normal balances
The following items appeared in the accounting records of Triguero 's, a retail music store that also sponsors concerts. Classify each of the items as an asset, liability; revenue; or expense from the company 's viewpoint. Also indicate the normal account balance of each item.

a. Amounts paid to a mall for rent.
b. Amounts to be paid in 10 days to suppliers.
c. A new fax machine purchased for office use.
d. Land held as an investment.
e. Amounts due from customers.
f. Daily sales of merchandise sold.
g. Promotional costs to publicize a concert.
h. A long-term loan owed to Citizens Bank.
i. The albums, tapes, and CDs held
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3/31 Paid $600 for March wages
3/31
Processed a $600 cash withdrawal (dividend) from the business for Joanne Burton

Instructions
a. Determine the impact of each of the preceding transactions on Burton’s assets, liabilities, and owner’s equity. See exhibit 1.5. Use the following format:

Assets = Liabilities + Owner’s Equity
Cash, Accounts Receivable, Land, Equipment Accounts Payable (+)Common Stock (+) Revenues (-) Dividends (-) Expenses

a. Record each transaction on a separate line. Calculate balances only after the last transaction has been recorded.
b. Prepare an income statement, a statement of retained earnings, and a balance sheet, (See Exhibit 1.2, 1.3 and 1.4)

6. Entry and trial balance preparation. Lee Adkins is a portrait artist. The following schedule represents Lee’s combined chart of accounts and trial balance as of May 31.

Account number Account name Debit Credit
110 Cash $ 2,700
120 Accounts Receivable 12,100
130 Equipment and Supplies 2,800
140 Studio 45,000
210 Accounts Payable $2,600
310 Lee Adkins, Capital 57,400
320 Lee Adkins, Drawing 30,000
410 Professional Fee Revenue 39,000
510 Advertising Expense 2,300
520 Salaries Expense 2,100
540 Utilities Expense 2,000 $99,000 $99,000

The general ledger also revealed account no. 530, Legal and
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