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College Accounting, Chapters 1-27

23rd Edition
HEINTZ + 1 other
ISBN: 9781337794756

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BuyFindarrow_forward

College Accounting, Chapters 1-27

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

EFFECTS OF TRANSACTIONS (BALANCE SHEET ACCOUNTS) Jon Wallace started a business. During the first month (March 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 account totals.

(a) Invested cash in the business, $30,000.

(b) Bought office equipment on account, $4,500.

(c) Bought office equipment for cash, $1,600.

(d) Paid cash on account to supplier in transaction (b), $2,000.

EFFECTS OF TRANSACTIONS (REVENUE, EXPENSE, WITHDRAWALS) This exercise is an extension of Exercise 2-3B. Let’s assume Jon Wallace completed the following additional transactions during March. Show the effect of each transaction on the basic elements of the expanded accounting equation: Assets = Liabilities + Owner’s Equity (CapitalDrawing + RevenuesExpenses). After transaction (k), report the totals for each element. Demonstrate that the accounting equation has remained in balance.

(e) Performed services and received cash, $3,000.

(f) Paid rent for March, $1,000.

(g) Paid March phone bill, $68.

(h) Jon Wallace withdrew cash for personal use, $800.

(i) Performed services for clients on account, $900.

(j) Paid wages to part-time employee, $500.

(k) Received cash for services performed on account in transaction (i), $500.

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($34,032)=Liabilities($2,500)+Owners'equity($36,268)

Working note:

The effects of each transaction on the accounts of accounting equation are given bellow:

TransactionAssets=</

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