Chapter 1: Q40PGA (page 43)
Using the accounting equation for transaction analysis Meg McKinney opened a public relations firm called Solid Gold on August 1, 2018. The following amounts summarize her business on August 31, 2018: During September 2018, the business completed the following transactions: a. Received contribution of \(17,000 cash from Meg McKinney in exchange for common stock. b. Performed service for a client and received cash of \)800. c. Paid off the beginning balance of accounts payable. d. Purchased office supplies from OfficeMax on account, \(1,200. e. Collected cash from a customer on account, \)2,000. f. Cash dividends of \(1,600 were paid to stockholders. g. Consulted for a new band and billed the client for services rendered, \)4,500. h. Recorded the following business expenses for the month: Paid office rent: \(1,000. Paid advertising: \)500. Analyze the effects of the transactions on the account ting equation of Solid Gold using the format presented in Exhibit 1-6
Short Answer
Effect of the transaction on the accounting equation is shown as follows:
Assets | = | Liabilities | + | Equity | |||||||||||||||
Contributed Capital | + | Retained Earnings | |||||||||||||||||
Cash | + | Accounts Receivable | + | Office Supplies | + | Land | Accounts Payable | Common Stock | - | Dividends | + | Service Revenue | - | Rent Expense | - | Advertising Expense | |||
Bal. | $1,900 | + | $3,200 | + | $0 | + | $15,000 | = | $5,000 | + | $11,900 | + | $3,200 | ||||||
a | +17,000 | +17,000 | |||||||||||||||||
Bal. | $18,900 | + | $3,200 | + | $0 | + | $15,000 | = | $5,000 | + | $28,900 | + | $3,200 | ||||||
b | +800 | +800 | |||||||||||||||||
Bal. | $19,700 | + | $3,200 | + | $0 | + | $15,000 | = | $5,000 | + | $28,900 | + | $4,000 | ||||||
c | -5,000 | -5000 | |||||||||||||||||
Bal. | $14,700 | + | $3,200 | + | $0 | + | $15,000 | = | $0 | + | $28,900 | + | $4,000 | ||||||
d | +1,200 | +1,200 | |||||||||||||||||
Bal. | $14,700 | + | $3,200 | + | $1,200 | + | $15,000 | = | $1,200 | + | $28,900 | + | $4,000 | ||||||
e | +2000 | -2000 | |||||||||||||||||
Bal. | $16,700 | + | $1,200 | + | $1,200 | + | $15,000 | = | $1,200 | + | $28,900 | + | $4,000 | ||||||
f | -1600 | -1,600 | |||||||||||||||||
Bal. | $15,100 | + | $1,200 | + | $1,200 | + | $15,000 | = | $1,200 | + | $28,900 | - | $1,600 | + | $4,000 | ||||
g | +4,500 | +4,500 | |||||||||||||||||
Bal. | $15,100 | + | $5,700 | + | $1,200 | + | $15,000 | = | $1,200 | + | $28,900 | - | $1,600 | + | $8,500 | ||||
h | -1,500 | -1000 | -500 | ||||||||||||||||
Bal. | $13,600 | + | $5,700 | + | $1,200 | + | $15,000 | = | $1,200 | + | $28,900 | - | $1,600 | + | $8,500 | - | $1,000 | - | $500 |
$35,500 | $35,500 |
Step by step solution
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