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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881

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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
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Problem 2-563 Analyzing Transactions

Several years ago, Mary Emerson founded Emerson Consulting Inc., a consulting business specializing in financial planning for young professionals. The following captions and amounts summarize Emerson Consulting’s balance sheet at December 31, 2018, the beginning of the current year:

Chapter 2, Problem 56BPSB, Problem 2-563 Analyzing Transactions Several years ago, Mary Emerson founded Emerson Consulting

During January 2019, the following transactions occurred:

  1. Issued common stock to a new stockholder in exchange for $12,000 cash.
  2. Perfumed advisory services for a client for $3,850 and received the fill amount in cash.
  3. Received $925 on account from a client for whom services had been performed on credit.
  4. Purchased supplies for $1,140 on credit.
  5. Paid $875 on accounts payable.
  6. Performed advisory services for $2,980 on credit.
  7. A Paid cash of $1,350 for secretarial services during January.
  8. Paid cash of $800 for January’s office rent.
  9. Paid militias used in January 2019 in the amount of $l,340.
  10. Paid a dividend of $500.

Required:

  1. Record the effects of the transactions listed above on the accounting equation for the business. Use the format given in {he problem starting with the totals at December 31, 2018.
  2. Prepare the trial balance at January 31, 2019.

To determine

Accounting Equation:

The accounting equation explains that the assets must be equal to the liabilities and stockholders’ equity on the occurrence of a business transaction. The dual aspect concept of accounting signifies that on each transaction the elements of the accounting equations are affected equally.

Requirement 1

Record the effects of the transactions listed on the accounting equation.

Explanation
    Assets = Liabilities + Equity
    Cash + Accounts + Supplies = Accounts + Notes + Common + Retained
    Receivable Payable Payable Stock Earnings
    $3,000$6,600$4,800$500$1,000$10,000$2,900
    a.12,00012,000
    b.3,8503,850
    c.925(925)
    d.1,1401,140
    e...
To determine

Trial Balance:

A financial statement which integrates all the balance of ledger accounts is termed as a trial balance. The total balance of debit and credit in trial balance should be equal at end of an accounting period.

Requirement 2

Prepare the trial balance at January 31, 2019.

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