College Accounting, Chapters 1-27

23rd Edition
HEINTZ + 1 other
ISBN: 9781337794756



College Accounting, Chapters 1-27

23rd Edition
HEINTZ + 1 other
ISBN: 9781337794756
Textbook Problem

EFFECT OF TRANSACTIONS ON ACCOUNTING EQUATION Jay Pembroke started a business. During the first month (April 20--), the following transactions occurred.

(a) Invested cash in business, $18,000.

(b) Bought office supplies for $4,600: $2,000 in cash and $2,600 on account.

(c) Paid one-year insurance premium, $1,200.

(d) Earned revenues totaling $3,300: $1,300 in cash and $2,000 on account.

(e) Paid cash on account to the company that supplied the office supplies in transaction (b), $2,300.

(f) Paid office rent for the month, $750.

(g) Withdrew cash for personal use, $100.


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.

STATEMENT OF OWNER’S EQUITY Based on Problem 2-9A, prepare a statement of owner’s equity for Jay Pembroke for the month of April 20--.

To determine

Prepare a statement of owners’ equity for the month of April.


Statement of Owners’ equity: This statement reports the beginning stockholder's equity and all the changes which led to ending stockholder's equity. Additional capital, net income from income statement is added to and drawings or dividends are deducted from beginning stockholder's equity to arrive at the end result, closing balance of stockholder's equity.

Prepare a statement of Owners’ equity:

Company JP
Statement of Owners' Equity
For the month ended April
Person J, Capital
Investments during April 1$18,000
Total investment$18,000
Net income for April (1)$2,550
Less: Withdrawals for April$100
Increase in capital$2,450
Person J, capital, April 30$20,450

Table (1)

Therefore, the ending balance of capital for Person J as on April 30 is $20,450...

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