Question

Question: SP 1 On October 1, 2017, Santana Rey launched a computer services company, Business Solutions, that is organized as a corporation and provides consulting services, computer system installations, and custom program development. Rey adopts the calendar year for reporting purposes and expects to prepare the company’s first set of financial statements on December 31, 2017.

Required Create a table like the one in Exhibit 1.9 using the following headings for columns: Cash; Accounts Receivable; Computer Supplies; Computer System; Office Equipment; Accounts Payable; Common Stock; Dividends; Revenues; and Expenses. Then use additions and subtractions within the table to show the dollar effects for each of the following October transactions for Business Solutions on the individual items of the accounting equation. Show new balances after each transaction.

Oct. 1 S. Rey invested \(45,000 cash, a \)20,000 computer system, and \(8,000 of office equipment in the company in exchange for its common stock.

3 The company purchased \)1,420 of computer supplies on credit from Harris Office Products.

6 The company billed Easy Leasing \(4,800 for services performed in installing a new web server.

8 The company paid \)1,420 cash for the computer supplies purchased from Harris Office Products on October 3.

10 The company hired Lyn Addie as a part-time assistant for \(125 per day, as needed.

12 The company billed Easy Leasing another \)1,400 for services performed.

15 The company received \(4,800 cash from Easy Leasing as partial payment toward its account.

17 The company paid \)805 cash to repair computer equipment damaged when moving it.

20 The company paid \(1,728 cash for advertisements published in the local newspaper.

22 The company received \)1,400 cash from Easy Leasing toward its account.

28 The company billed IFM Company \(5,208 for services performed.

31 The company paid \)875 cash for Lyn Addie’s wages for seven days of work this month.

31 The company paid $3,600 cash in dividends to the owner (sole shareholder).

Short answer

The assets are a resource that generates the income of their owners and the accounting equation is prepared. The total of the accounting equation is $77,400

Step-by-step solution

Definition of Assets

The assets are defined as the economic resources which are owned by the business organization or individuals and help in generating some revenue in the future.

Preparation of accounting equation

	Assets					=	Liab	Equity
Date	Cash	AR	Computer	Computer	Office		AP	Com	-Dividend	Revenue	-Expenses
	($)	($)	Supplies ($)	System ($)	Equipment ($)		($)	Stock ($)	($)	($)	($)
Oct
1	45,000			20,000	8,000			73,000
Bal	45,000			20,000	8,000			73,000
3			1,420				1,420
Bal	45,000		1,420	20,000	8,000		1,420	73,000
6		4,800								4,800
Bal	45,000	4,800	1,420	20,000	8,000		1,420	73,000		4,800
8	-1,420						1,420
Bal	43,580	4,800	1,420	20,000	8,000		0	73,000		4,800
10
Bal	43,580	4,800	1,420	20,000	8,000		0	73,000		4,800
12		1,400								1,400
Bal	43,580	6,200	1,420	20,000	8,000		0	73,000		6,200
15	4,800	-4,800
Bal	48,380	1,400	1,420	20,000	8,000		0	73,000		6,200
17	-805										-805
Bal	47,575	1,400	1,420	20,000	8,000		0	73,000		6,200	-805
20	-1,728										-1,728
Bal	45,847	1,400	1,420	20,000	8,000		0	73,000		6,200	-2,533
22	1,400	-1,400
Bal	47,247	0	1,420	20,000	8,000		0	73,000		6,200	-2,533
28		5,208								5,208
Bal	47,247	5,208	1,420	20,000	8,000		0	73,000		11,408	-2,533
31	-875										-875
Bal	46,372	5,208	1,420	20,000	8,000		0	73,000		11,408	-3,408
31	-3,600								-3,600
Bal	42,772	5,208	1,420	20,000	8,000		0	73,000	-3,600	11,408	-3,408