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College Accounting, Chapters 1-27

23rd Edition
HEINTZ + 1 other
ISBN: 9781337794756

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Chapter
Section
BuyFindarrow_forward

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.

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.

BALANCE SHEET Based on Problem 2-9A, prepare a balance sheet for Jay Pembroke as of April 30, 20--.

To determine

Prepare a balance sheet as of April 30.

Explanation

Balance sheet: This financial statement reports a company’s resources (assets) and claims of creditors (liabilities) and stockholders (stockholders’ equity) over those resources. The resources of the company are assets which include money contributed by stockholders and creditors. Hence, the main elements of the balance sheet are assets, liabilities, and stockholders’ equity.

Prepare a balance sheet:

JP
Balance Sheet
As of April 30
AssetsAmount ($)LiabilitiesAmount ($)
Cash 12,950 Accounts payable300
Supplies 4,600Total liabilities300
Accounts receivable2,000
Prepaid insurance1,200Owners’ Equity
&...

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