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Fundamental Accounting Principles
24th Edition
ISBN: 9781259916960
Author: Wild, John J., Shaw, Ken W.
Publisher: Mcgraw-hill Education,
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Question
Chapter 1, Problem 13E
To determine
Concept Introduction:
It reflects the concept of double entry accounting. The accounting equation displays that all assets are either financed through shareholders funds i.e. equity or by borrowing money i.e. liabilities. Thus, the accounting equation is:
To Prepare:
The table showing the effects of transactions completed by the Ming Chen.
Expert Solution & Answer
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Explanation of Solution
- Owner invested $60,000 cash in the company along with equipment that had a $15,000 market value.
Assets = Liabilities + Equity |
Cash + Accounts + Equipment = Accounts + M Chen's - M Chen's + Revenues - Expenses Receivables Payables Capital Withdrawals |
+$60,000 + $15,000 $75,000 |
$60,000 + $15,000 = $75,000 |
- The Company paid $1,500 cash for rent of office space for the month.
Assets = Liabilities + Equity |
Cash + Accounts + Equipment = Accounts + M Chen's - M Chen's + Revenues - Expenses Receivables Payables Capital Withdrawals |
$60,000 + $15,000 = $75,000 |
-$1,500 -$1,500 |
$58,500 + $15,000 = $73,500 |
- The company purchased $10,000 of additional equipment on credit (payment due within 30 days).
Assets = Liabilities + Equity |
Cash + Accounts + Equipment = Accounts + M Chen's - M Chen's + Revenues - Expenses Receivables Payables Capital Withdrawals |
$58,500 $15,000 = $73,500 |
+$10,000 +$10,000 |
$58,500 + $25,000 = $10,000 + $73,500 |
- The company completed work for a client and immediately collected the $2,500 cash earned.
Assets = Liabilities + Equity |
Cash + Accounts + Equipment = Accounts + M Chen's - M Chen's + Revenues - Expenses Receivables Payables Capital Withdrawals |
$58,500 $25,000 = $10,000 + $73,500 |
+$2,500 +$2,500 |
$61,000 + $25,000 = $10,000 + $76,000 |
- The company completed work for a client and sent a bill for $8,000 to be received within 30 days.
Assets = Liabilities + Equity |
Cash + Accounts + Equipment = Accounts + M Chen's - M Chen's + Revenues - Expenses Receivables Payables Capital Withdrawals |
$61,000 $25,000 = $10,000 + $76,000 |
+ $8,000 +$8,000 |
$61,000 + $8,000 + $25,000 = $10,000 + $84,000 |
- The company purchased additional equipment $6,000 for cash.
Assets = Liabilities + Equity |
Cash + Accounts + Equipment = Accounts + M Chen's - M Chen's + Revenues - Expenses Receivables Payables Capital Withdrawals |
$61,000 + $8,000 $25,000 = $10,000 + $84,000 |
-$6,000 +$6,000 |
$55,000 + $8,000 + $31,000 = $10,000 + $84,000 |
- The company paid an assistant $3000 cash as wages for the month.
Assets = Liabilities + Equity |
Cash + Accounts + Equipment = Accounts + M Chen's - M Chen's + Revenues - Expenses Receivables Payables Capital Withdrawals |
$55,000 + $8,000 $31,000 = $10,000 + $84,000 |
-$3,000 -$3,000 |
$52,000 + $8,000 + $31,000 = $10,000 + $81,000 |
- The company collected $5000 cash as a partial payment for the amount owed by the client in transaction e.
Assets = Liabilities + Equity |
Cash + Accounts + Equipment = Accounts + M Chen's - M Chen's + Revenues - Expenses Receivables Payables Capital Withdrawals |
$52,000 + $8,000 $31,000 = $10,000 + $81,000 |
+$5,000 -$5,000 |
$57,000 + $3,000 + $31,000 = $10,000 + $81,000 |
- The company paid $10,000 cash to settle the liability created in transaction c
Assets = Liabilities + Equity |
Cash + Accounts + Equipment = Accounts + M Chen's - M Chen's + Revenues - Expenses Receivables Payables Capital Withdrawals |
$57,000 + $3,000 $31,000 = $10,000 + $81,000 |
-$10,000 -$10,000 |
$47,000 + $3,000 + $31,000 = $81,000 |
- Owner withdrew $1,000 cash from the company for personal use
Assets = Liabilities + Equity |
Cash + Accounts + Equipment = Accounts + M Chen's - M Chen's + Revenues - Expenses Receivables Payables Capital Withdrawals |
$47,000 + $3,000 $31,000 = $81,000 |
-$1,000 -$1,000 |
$46,000 + $3,000 + $31,000 = $80,000 |
Hence, the effects of transactions of Ming Chen are shown in the above tables along with the closing balances after each transaction.
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