Fundamental Accounting Principles
Fundamental Accounting Principles
24th Edition
ISBN: 9781260158595
Author: Wild
Publisher: MCG
Question
Book Icon
Chapter 1, Problem 10E
To determine

Concept Introduction:

Accounting equation - The accounting equation is the foundation of the double entry accounting. The accounting equation displays that all assets are either financed by borrowing money or paying with the money of the company's shareholders. Thus, the accounting equation is: Assets= Liabilities + Shareholder Equity

Moreover, the balance sheet is a complex display of this equation.

The explanation from a through j that best describes the transactions 1 through 5.

Expert Solution & Answer
Check Mark

Explanation of Solution

Any purchase or sale by an accounting equity has an equal effect on both sides of the equation, or has offsetting effects on the same side of the equation. Keeping this accounting equation in mind, the solution is as mentioned below:                                     Assets                                                                       =       Liabilities          +               EquityCash+Accounts Receivable+Office Supplies+Office furniture=Accounts Payable+ Zen Capital+ Revenues$40,000+      $0                     +         $0                 +$0                         = $0                              +  $40,000     +$0

The above equation tells that the company only has$40,000 cash which is financed from the capital. And this situation is best explained by the Option d, stating the owner invested $40,000 cash in the business.

                                    Assets                                                                       =       Liabilities          +               EquityCash+Accounts Receivable+Office Supplies+Office furniture=Accounts Payable+ Zen Capital+ Revenues$38,000+      $0                     +         $3,000        +$0                          = $1,000                      +  $40,000     +$0

From the above equation, we can interpret that the Company had $40,000 cash, out of which it spent $2,000 and is left with $38,000 cash in hand. From those $2,000 cash, it bought office supplies worth $3,000 by borrowing $1,000. This equation is best described in the Option e, stating that the company purchased office supplies for $3,000 by paying $2,000 cash and putting $1,000 on credit.                                    Assets                                                                       =       Liabilities          +               EquityCash+Accounts Receivable+Office Supplies+Office furniture=Accounts Payable+ Zen Capital+ Revenues$30,000+      $0                     +         $3,000        +$8,000                  = $1,000                      +  $40,000     +$0

The above equation explains that the company spent $8,000 cash more to buy office furniture, which in turn reduced the cash in hand to $30,000. And this is best explained by the Option a, stating that the company purchased office furniture for $8,000 cash.                                    Assets                                                                       =       Liabilities          +               EquityCash+Accounts Receivable+Office Supplies+Office furniture=Accounts Payable+ Zen Capital+ Revenues$30,000+      $6,000             +         $3,000        +$8,000                  = $1,000                      +  $40,000    +$6,000

The equation mentioned above shows that the company made credit sales for $6,000, which increased the accounts receivable on the asset side and revenues on the equity side. This is better explained by the Option f, which states that the company billed a customer $6,000 for services provided.                                    Assets                                                                       =       Liabilities          +               EquityCash+Accounts Receivable+Office Supplies+Office furniture=Accounts Payable+ Zen Capital+ Revenues$31,000+      $6,000             +         $3,000        +$8,000                  = $1,000                      +  $40,000    +$7,000

In this equation, the cash in hand increased by $1,000 with $1,000 increase in revenue, which implies that the company sold services of $1,000 in cash. This equation is best explained in the Option h, which states that the company provided services for $1,000 cash.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Chapter 1 Solutions

Fundamental Accounting Principles

Ch. 1 - Prob. 11DQCh. 1 - Prob. 12DQCh. 1 - Prob. 13DQCh. 1 - A business reports its own office stationary on...Ch. 1 - Why is the revenue recognition principle needed?...Ch. 1 - Prob. 16DQCh. 1 - Prob. 17DQCh. 1 - What events or transactions change equity?Ch. 1 - Prob. 19DQCh. 1 - What do accountants mean by the term revenue?Ch. 1 - 21. Define net income and explain its...Ch. 1 - Identify the four basics financial statements of a...Ch. 1 - Prob. 23DQCh. 1 - 24. Give two examples of expenses a business might...Ch. 1 - Prob. 25DQCh. 1 - Prob. 26DQCh. 1 - Prob. 27DQCh. 1 - Prob. 28DQCh. 1 - Prob. 29DQCh. 1 - Prob. 30DQCh. 1 - B Explain why investing (assets) and financing...Ch. 1 - Prob. 32DQCh. 1 - Prob. 33DQCh. 1 - Prob. 1QSCh. 1 - Prob. 2QSCh. 1 - Prob. 3QSCh. 1 - Prob. 4QSCh. 1 - Prob. 5QSCh. 1 - Prob. 6QSCh. 1 - This icon highlights assignments that enhance...Ch. 1 - Prob. 8QSCh. 1 - Prob. 9QSCh. 1 - Prob. 10QSCh. 1 - Prob. 11QSCh. 1 - Identifying items with financial statements P2...Ch. 1 - P2 Classify each of the following items as...Ch. 1 - P2 Classify each of the following items as assets...Ch. 1 - Preparing an income statement P2...Ch. 1 - Prob. 16QSCh. 1 - Prob. 17QSCh. 1 - Prob. 1ECh. 1 - Exercise 1-2 Identifying accounting users and uses...Ch. 1 - Prob. 3ECh. 1 - Prob. 4ECh. 1 - Prob. 5ECh. 1 - Prob. 6ECh. 1 - Prob. 7ECh. 1 - Prob. 8ECh. 1 - Prob. 9ECh. 1 - Prob. 10ECh. 1 - Prob. 11ECh. 1 - Prob. 12ECh. 1 - Prob. 13ECh. 1 - Exercise 1-14 Analyzing return on assets A2 Swiss...Ch. 1 - Prob. 15ECh. 1 - Prob. 16ECh. 1 - Exercise 117 Preparing 117 P2 Use the information...Ch. 1 - Prob. 18ECh. 1 - Prob. 19ECh. 1 - Prob. 20ECh. 1 - Prob. 21ECh. 1 - Exercise 1-22 Preparing an income statement for a...Ch. 1 - Exercise 1-23 Using the accounting equation A1...Ch. 1 - Problem 1-1A Identifying effects of transactions...Ch. 1 - Prob. 2APSACh. 1 - Problem 1-3A Preparing an income statement P2 As...Ch. 1 - Problem 1-4A Preparing a statement of owner's...Ch. 1 - Problem 1-5A Preparing a balance sheet P2 Use the...Ch. 1 - Problem 1-6A Preparing a statement of cash flows...Ch. 1 - Prob. 7APSACh. 1 - Prob. 8APSACh. 1 - Prob. 9APSACh. 1 - Prob. 10APSACh. 1 - Prob. 11APSACh. 1 - Prob. 12APSACh. 1 - Prob. 13APSACh. 1 - Prob. 14APSACh. 1 - Problem 1-1B Identifying effects of transactions...Ch. 1 - Prob. 2BPSBCh. 1 - Prob. 3BPSBCh. 1 - Problem 1-4B Preparing a statement of owner's...Ch. 1 - Prob. 5BPSBCh. 1 - Prob. 6BPSBCh. 1 - Prob. 7BPSBCh. 1 - Prob. 8BPSBCh. 1 - Prob. 9BPSBCh. 1 - Prob. 10BPSBCh. 1 - Prob. 11BPSBCh. 1 - Problem 112BA Identifying risk and return A3 All...Ch. 1 - Prob. 13BPSBCh. 1 - Prob. 14BPSBCh. 1 - On October 1. 2019, Santana Rev launched a...Ch. 1 - Prob. 1AACh. 1 - Prob. 2AACh. 1 - Prob. 3AACh. 1 - Prob. 1BTNCh. 1 - Prob. 2BTNCh. 1 - Visit the EDGAR database at SEC.gov. Access the...Ch. 1 - Prob. 4BTNCh. 1 - Prob. 5BTNCh. 1 - Prob. 6BTN
Knowledge Booster
Background pattern image
Recommended textbooks for you
Text book image
FINANCIAL ACCOUNTING
Accounting
ISBN:9781259964947
Author:Libby
Publisher:MCG
Text book image
Accounting
Accounting
ISBN:9781337272094
Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:Cengage Learning,
Text book image
Accounting Information Systems
Accounting
ISBN:9781337619202
Author:Hall, James A.
Publisher:Cengage Learning,
Text book image
Horngren's Cost Accounting: A Managerial Emphasis...
Accounting
ISBN:9780134475585
Author:Srikant M. Datar, Madhav V. Rajan
Publisher:PEARSON
Text book image
Intermediate Accounting
Accounting
ISBN:9781259722660
Author:J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:McGraw-Hill Education
Text book image
Financial and Managerial Accounting
Accounting
ISBN:9781259726705
Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:McGraw-Hill Education