   Chapter 2, Problem 4SEA

Chapter
Section
Textbook Problem

EFFECTS OF TRANSACTIONS (BALANCE SHEET ACCOUNTS) John Sullivan started a business. During the first month (February 20--), the following transactions occurred. Show the effect of each transaction on the accounting equation: Assets = Liabilities + Owner’s Equity. After each transaction, show the new totals.(a) Invested cash in the business, $27,000.(b) Bought office equipment on account,$7,500.(c) Bought office equipment for cash, $1,600.(d) Paid cash on account to supplier in transaction (b),$2,300.EFFECTS OF TRANSACTIONS (REVENUE, EXPENSE, WITHDRAWALS) This exercise is an extension of Exercise 2-3A. Let’s assume John Sullivan completed the following additional transactions during February. Show the effect of each transaction on the basic elements of the expanded accounting equation: Assets = Liabilities + Owner’s Equity (Capital − Drawing + Revenues − Expenses). After transaction (k), report the totals for each element. Demonstrate that the accounting equation has remained in balance.(e) Received cash from a client for professional services, $1,500.(f) Paid office rent for February,$600.(g) Paid February phone bill, $64.(h) Withdrew cash for personal use,$1,000.(i) Performed services for clients on account, $750.(j) Paid wages to part-time employee,$1,200.(k) Received cash for services performed on account in transaction (i), $400. To determine Show the effect of each transaction and demonstrate that the accounting equation remained in balance. Explanation Accounting equation: Accounting equation is an accounting tool expressed in the form of equation, by creating a relation between resources or assets of a business and claims on the resources by the creditors, and the owners. The effects of each transaction on the accounts of accounting equation are given bellow: Figure (1) Therefore, from the above calculation, it is demonstrated that accounting equation remained balance as given below: Assets($31,586)=Liabilities($5,200)+Owners'equity($26,386)

Working note:

Calculate the balance of assets, liabilities and owners’ equity by showing the effects of each transaction on the accounts of accounting equation are given bellow:

 Transaction Assets =

Still sussing out bartleby?

Check out a sample textbook solution.

See a sample solution

The Solution to Your Study Problems

Bartleby provides explanations to thousands of textbook problems written by our experts, many with advanced degrees!

Get Started

What is inflation and what causes it?

Essentials of Economics (MindTap Course List)

What does cross-referencing mean in the posting process?

College Accounting (Book Only): A Career Approach

What purpose do protocols serve?

Accounting Information Systems

Define the term product

MKTG 12:STUDENT ED.-TEXT

Describe what a tariff is and its economic effects.

Principles of Macroeconomics (MindTap Course List)

CAPITAL BUDGETING CRITERIA Your division is considering two projects. Its WACC is 10%, and the projects after-t...

Fundamentals of Financial Management, Concise Edition (with Thomson ONE - Business School Edition, 1 term (6 months) Printed Access Card) (MindTap Course List) 