1.
Assets = Liabilities + Shareholders Equity
Business transaction: Business transaction is a record of any economic activity, resulting in the change in the value of the assets, the liabilities, and the Shareholder’s equities, of a business. Business transaction is also referred to as financial transaction.
To Indicate: The effect of each given transaction of Company PSM on the accounting equation.
2.
To Prepare: The income statement for Company PSM for the month ended June 30, 2019.
3.
To Prepare: A statement of owner’s equity for Company PSM for the month ended June 30, 2019.
4.
To Prepare: A
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Chapter 1 Solutions
Accounting
- Peyton Smith enjoys listening to all types of music and owns countless CDs. Over the years, Peyton $1,340 has gained a local reputation for knowledge of music from classical to rap and the ability to pultogether sets of recordings that appeal to all ages.During the last several months, Peyton served as a guest disc jockey on a local radio station. In addition, Peyton has entertained at several friends' parties as the host deejay.On June 1, 2OY5, Peyton established a corporation known as PS Music. Using an extensive col lection of music MP3 files, Peyton will serve as a disc jockey on a fee basis for weddings, college parties, and other events. During June, Peyton entered into the following transactions:June 1. Deposited $4,000 in a checking account in the name of PS Music in exchange for common stock.2. Received $3,500 from a local radio station for serving as the guest disc jockey for June.2. Agreed to share office space with a local real estate agency. Pinnacle Realty. PS Music will…arrow_forwardIf answered within 40mins, it would be appreciable!! Shannon Burns enjoys listening to all types of music and owns countless CDs and tapes. Over the years, Shannon has gained a local reputation for knowledge of music from classical to rap and the ability to put together sets of recordings that appeal to all ages.During the last several months, Shannon served as a guest disc jockey on a local radio station. In addition, Shannon has entertained at several friends’ parties as the host deejay.On April 1, 2006, Shannon established a proprietorship known as Dancin Music.Using an extensive collection of CDs and tapes, Shannon will serve as a disc jockey on a fee basis for weddings, college parties, and other events. During April, Shannon entered into the following transactions:April1. Deposited $7,000 in a checking account in the name of Dancin Music.2. Received $2,000 from a local radio station for serving as the guest disc jockey for April.2. Agreed to share office space with a local real…arrow_forwardJenna, a longtime client of yours, is an architect and the president of the local Rotary chapter. To keep up to date with the latest developments in her profession, she attends continuing education seminars offered by the architecture school at State University. During 2019, Jenna spends $2,000 on course tuition to attend such seminars. She also spends another $400 on architecture books during the year. Jenna’s daughter, Caitlin, is a senior majoring in engineering at the University of the Midwest. During the 2019 calendar year, Caitlin incurs the following expenses: $8,200 for tuition ($4,100 per semester) and $750 for books and course materials. Caitlin, who Jenna claims as a dependent, lives at home while attending school full-time. Jenna is married, files a joint return, and reports a combined AGI with her husband of $118,000. In her capacity as president of the local Rotary chapter, Jenna has asked you to make a 30-to 45-minute speech outlining the different ways the tax law…arrow_forward
- Jenna, a longtime client of yours, is employed as an architect and is the presi-dent of the local Rotary chapter. To keep up to date with developments in her profession, she attends continuing education seminars offered by the architecture school at State University. During 2021, Jenna spends $2,000 on course tuition to attend these seminars. She spends another $400 on architecture books during the year. Jenna’s daughter, Caitlin, is a senior majoring in engineering at the University of the Midwest. During the 2021 calendar year, Caitlin incurs the following expenses: $8,200 for tuition ($4,100 per semester) and $750 for books and course materials. Caitlin, who Jenna claims as a dependent, lives at home while attending school full-time. Jenna is married, files a joint return, and reports a combined AGI with her spouse of $121,000. a. Calculate the couple’s education tax credits for 2021. b. Calculate the couple’s education tax credits if combined AGI was $162,000. c. In her capacity as…arrow_forwardWhile she was a college student, Angel lived by a bookstore located near campus. She thinks a bookstore located on the other side of campus would be successful. She incurs expenses of $42,800 (legal fees, accounting fees, marketing survey, etc.) in exploring its business potential. Her parents have agreed to lend her the money required to start the business. What amount of these investigation costs can Angel deduct if she opens the bookstore on August 1, 2019.arrow_forwardMary operates a successful bicycle shop as a sole proprietor. After several years of profits, in 2020 she decided to branch out and turn her baking hobby into a business by opening a cupcake shop. She spent a total of $52,560 on securing a lease for a prime location (real estate agent’s and attorney’s fees), training em-ployees, and pre-opening advertising. She opened “BabyCakes” on May 1, 2020. In preparing a Schedule C to be included with Mary’s 2020 return, you included $___ as a deduction for start-up costs. Your task: State and explain the correct amount of Mary’s 2020 start-up costs deduction.arrow_forward
- Jack, a geologist, had been debating for years whether or not to venture out on his own and operate his own business. He had developed a lot of solid relationships with clients, and he believed that many of them would follow him if he were to leave his current employer. As part of a New Year’s resolution, Jack decided he would finally do it. Jack put his business plan together, and, on January 1 of this year, Jack opened his doors for business as a C corporation called Geo-Jack (GJ). Jack is the sole shareholder. Jack reported the following financial information for the year (assume GJ reports on a calendar year, uses the accrual method of accounting, and elects to account for inventory). In January, GJ rented a small business office about 12 miles from Jack’s home. GJ paid $10,000, which represented a damage deposit of $4,000 and rent for two years ($3,000 annually). GJ earned and collected $290,000 performing geological-related services and selling its specialized digging tool. GJ…arrow_forwardThroughout this book, we will present a continuing narrative about Harry and Belinda Johnson. Following is a brief description of the lives of this couple.Harry is 28 years old and graduated five years ago with a bachelor's degree in interior design from a large Midwestern university near his hometown in Indiana. Since graduation Harry has been working in small interior design firm in Kansas City earning a salary of about $45,000.Belinda is 27, has a degree in business administration from a university on the West Coast, and has been employed in a medium-size manufacturing firm in California for about five years. Harry and Belinda both worked on their schools' student newspapers and met at a conference during their junior year in college.After all these years they met again socially in January in Kansas City, Missouri where Belinda was visiting relatives and by chance she and Harry were at the same museum. After getting reacquainted they started dating and in only a matter of months…arrow_forwardMelanie is employed full-time as an accountant for a national hardware chain. She recently started a private consulting practice, which provides tax advice and financial planning to the general public. For this purpose, she maintains an office in her home. Expenses relating to her home for 2020 are as follows: Real property taxes $3,600 Interest on home mortgage 3,800 Operating expenses of home 900 Melanie's residence cost $350,000 (excluding land) and has living space of 2,000 square feet, of which 20% (400 square feet) is devoted to business. The office was placed in service in February 2019, and under the Regular Method, Melanie had an unused office in the home deduction of $800 for 2019. Assume there is sufficient net income from her consulting practice. Round deprecation to the nearest dollar. a. What amount can Melanie claim this year for her office in the home deduction under the Regular Method? b. What is Melanie's office in the home deduction under the…arrow_forward
- Melanie is employed full-time as an accountant for a national hardware chain. She also has recently started a private consulting practice, which provides tax advice and financial planning to the general public. For this purpose, she maintains an office in her home. Expenses relating to her home for 2020 are as follows: Real property taxes $5,000 Interest on home mortgage 6,000 Operating expenses of home 1,250 Melanie's residence cost $412,000 (excluding land) and has living space of 2,000 square feet, of which 28% (560 square feet) is devoted to business. The office was placed in service in February 2019, and under the Regular Method, Melanie had an unused office in the home deduction of $500 for 2019. Assume there is sufficient net income from her consulting practice. a. What amount can Melanie claim this year for her office in the home deduction under the Regular Method?$ b. What is Melanie's office in the home deduction under the Simplified Method?$arrow_forwardRex loves to work with his hands and is very good at making small figurines. Three years ago, Rex opened Bronze Age Miniatures (BAM) for business as a sole proprietorship. BAM produces miniature characters ranging from sci-fi characters (his favorite) to historical characters like George Washington (the most popular). Business has been going very well for him, and he has provided the following information relating to his business. A.Rex received approval from the IRS to switch from the cash method of accounting to the accrual method of accounting effective January 1 of this year. At the end of last year, BAM reported accounts receivable that had not been included in income under the accrual method of $14,000 and accounts payable that had not been deducted under the accrual method of $5,000. b.In March, BAM sold 5,000 miniature historical figures to History R Us Incorporated (HRU), a retailer of historical artifacts and figurines, for $75,000. c.HRU was so impressed with the figurines…arrow_forwardenna, a longtime client of yours, is employed as an architect. To keep up to date with developments in her profession, she attends continuing education seminars offered by the architecture school at State University. This year, Jenna spends $2,000 on course tuition to attend these seminars. She spends another $400 on architecture books during the year. Jenna's dependent daughter Caitlin is a senior majoring in engineering at the University of the Midwest. During the 2021 calendar year, Caitlin incurs the following expenses: $8,200 for tuition ($4,100 per semester) and $750 for books and course materials. Caitlin lives at home while attending school full-time. Jenna is married, files a joint return, and has a combined AGI with her spouse Morrie of $120,000. 1. Calculate the couple’s education tax credits if their combined AGI is $162,000.arrow_forward
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