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EFFECT OF TRANSACTIONS ON ACCOUNTING EQUATION David Segal started a business. During the first month (October 20--), the following transactions occurred. (a) Invested cash in the business, $15,000. (b) Bought office supplies for $3,800: $1,800 in cash and $2,000 on account. (c) Paid one-year insurance premium, $1,000. (d) Earned revenues amounting to $2,700: $1,700 in cash and $1,000 on account. (e) Paid cash on account to the company that supplied the office supplies in transaction (b), $1,800. (f) Paid office rent for the month, $650. (g) Withdrew cash for personal use, $150. REQUIRED Show the effect of each transaction on the individual accounts of the expanded accounting equation: Assets = Liabilities + Owner’s Equity (Capital − Drawing + Revenues − Expenses) . After transaction (g), report the totals for each element. Demonstrate that the accounting equation has remained in balance. INCOME STATEMENT Based on Problem 2-9B, prepare an income statement for David Segal for the month of October 20--.

BuyFind

College Accounting, Chapters 1-27

23rd Edition
HEINTZ + 1 other
Publisher: Cengage Learning,
ISBN: 9781337794756
BuyFind

College Accounting, Chapters 1-27

23rd Edition
HEINTZ + 1 other
Publisher: Cengage Learning,
ISBN: 9781337794756

Solutions

Chapter
Section
Chapter 2, Problem 10SPB
Textbook Problem

EFFECT OF TRANSACTIONS ON ACCOUNTING EQUATION David Segal started a business. During the first month (October 20--), the following transactions occurred.

(a) Invested cash in the business, $15,000.

(b) Bought office supplies for $3,800: $1,800 in cash and $2,000 on account.

(c) Paid one-year insurance premium, $1,000.

(d) Earned revenues amounting to $2,700: $1,700 in cash and $1,000 on account.

(e) Paid cash on account to the company that supplied the office supplies in transaction (b), $1,800.

(f) Paid office rent for the month, $650.

(g) Withdrew cash for personal use, $150.

REQUIRED

Show the effect of each transaction on the individual accounts of the expanded accounting equation: Assets = Liabilities + Owner’s Equity (CapitalDrawing + RevenuesExpenses). After transaction (g), report the totals for each element. Demonstrate that the accounting equation has remained in balance.

INCOME STATEMENT Based on Problem 2-9B, prepare an income statement for David Segal for the month of October 20--.

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Chapter 2 Solutions

College Accounting, Chapters 1-27
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