Maurice Tutor
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Using the accounting equation for transaction analysis
Missy Crone owns and operates a public relations firm called Top 40. The following amounts summarize her business on August 31, 2012:
7 8 9 10
| Â | Â | Â |
Assets |
 |
= |
Liabilities + |
Owner"s equity |
|
Date |
Cash + |
Amount receivable + |
Supplies + |
Land |
= |
Accounts payable + |
Crone, capital |
|
Bal |
2100+ |
 |
0+ |
10,000 |
= |
6,000+ |
8,100 |
During September 2012, the business completed the following transactions:
a. Gave capital to Crone and received cash of $10,000.
b. Performed service for a client and received cash of $1,000.
c. Paid off the beginning balance of accounts payable.
d. Purchased supplies from OfficeMax on account, $700.
e. Collected cash from a customer on account, $500.
f. Received cash of $1,900 and gave capital to owner.
g. Consulted for a new band and billed the client for services rendered, $5,800.
h. Recorded the following business expenses for the month:
1. Paid office rent, $900.
2. Paid advertising, $400.
i. Returned supplies to OfficeMax for $80 from item d, which was the cost of the supplies.
j. Crone withdrew cash of $2,700.
.
Requirement
1. Analyze the effects of the preceding transactions on the accounting equation of
Top 40. Adapt the format to that of Exhibit 1-6.
Preparing financial statements and evaluating business performance
Presented here are the accounts of Quick and EZ Delivery for the year ended December 31, 2012.
Â
|
Land |
$7,000 |
Owner investment, 2012 |
$32,000 |
|
Note payable |
$30,000 |
Accounts payable |
$14,000 |
|
Property tax expense |
2,900 |
Accounts receivable |
1,700 |
|
Trott, drawing |
32,000 |
Advertising expense |
17,000 |
|
Rent expense |
13,000 |
Building |
137,900 |
|
Salary expense |
69,000 |
Cash |
6,000 |
|
Salary payable |
500 |
Equipment |
17,000 |
|
Service revenue |
192,000 |
Insurance expense |
2,000 |
|
Supplies |
8,000 |
Interest expense |
6,000 |
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Requirements
1. Prepare Quick and EZ Delivery’s income statement.
2. Prepare the statement of owner’s equity.
3. Prepare the balance sheet.
4. Answer these questions about the company:
a. Was the result of operations for the year a profit or a loss? How much?
b. How much in total economic resources does the company have as it moves into the new year?
c. How much does the company owe to creditors?
d. What is the dollar amount of the owner’s equity in the business at the end of the year?