Concept explainers
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Accounting equation represents the relationship between assets, liabilities and shareholders’ equity. It is the foundation of double entry system and it helps to analyze the business transaction. Accounting equation displays the total assets are equal to the total liabilities and shareholders’ equities. Thus, the accounting equation is,
To describe: The effect of each transaction on assets, liabilities and
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To describe: The effect of each transaction on assets, liabilities and stockholders’ equity.
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To describe: The effect of each transaction on assets, liabilities and stockholders’ equity.
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To describe: The effect of each transaction on assets, liabilities and stockholders’ equity.
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To describe: The effect of each transaction on assets, liabilities and stockholders’ equity.
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To describe: The effect of each transaction on assets, liabilities and stockholders’ equity.
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To describe: The effect of each transaction on assets, liabilities and stockholders’ equity.
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To describe: The effect of each transaction on assets, liabilities and stockholders’ equity.
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To describe: The effect of each transaction on assets, liabilities and stockholders’ equity.
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Financial Accounting: Tools for Business Decision Making, 8th Edition
- For each of the following transactions, state which special journal (Sales Journal, Cash Receipts Journal, Cash Disbursements Journal, Purchases Journal, or General Journal) and which subsidiary ledger (Accounts Receivable, Accounts Payable, neither) would be used in recording the transaction. A. Sold inventory for cash B. Issued common stock for cash C. Received and paid utility bill D. Bought office equipment on account E. Accrued interest on a loan at the end of the accounting period F. Paid a loan payment G. Bought inventory on account H. Paid employees I. Sold inventory on account J. Paid monthly insurance billarrow_forwardFrom the following list, identify which items are considered original sources: A. accounts receivable B. receipt from post office for post office box C. purchase order D. general ledger E. adjusted trial balance F. statement of retained earnings G. electric bill H. packing slip I. company expense account J. statement of cash flowsarrow_forwardAnalyzing the Accounts The controller for Summit Sales Inc. provides the following information on transactions that occurred during the year: a. Purchased supplies on credit, $18,600 b. Paid $14,800 cash toward the purchase in Transaction a c. Provided services to customers on credit1 $46,925 d. Collected $39,650 cash from accounts receivable e. Recorded depreciation expense, $8,175 f. Employee salaries accrued, $15,650 g. Paid $15,650 cash to employees for salaries earned h. Accrued interest expense on long-term debt, $1,950 i. Paid a total of $25,000 on long-term debt, which includes $1.950 interest from Transaction h j. Paid $2,220 cash for l years insurance coverage in advance k. Recognized insurance expense, $1,340, that was paid in a previous period l. Sold equipment with a book value of $7,500 for $7,500 cash m. Declared cash dividend, $12,000 n. Paid cash dividend declared in Transaction m o. Purchased new equipment for $28,300 cash. p. Issued common stock for $60,000 cash q. Used $10,700 of supplies to produce revenues Summit Sales uses the indirect method to prepare its statement of cash flows. Required: 1. Construct a table similar to the one shown at the top of the next page. Analyze each transaction and indicate its effect on the fundamental accounting equation. If the transaction increases a financial statement element, write the amount of the increase preceded by a plus sign (+) in the appropriate column. If the transaction decreases a financial statement element, write the amount of the decrease preceded by a minus sign (-) in the appropriate column. 2. Indicate whether each transaction results in a cash inflow or a cash outflow in the Effect on Cash Flows column. If the transaction has no effect on cash flow, then indicate this by placing none in the Effect on Cash Flows column. 3. For each transaction that affected cash flows, indicate whether the cash flow would be classified as a cash flow from operating activities, cash flow from investing activities, or cash flow from financing activities. If there is no effect on cash flows, indicate this as a non-cash activity.arrow_forward
- Current Attempt in Progress Complete the below table indicating (a) whether each transaction increases (+), decreases (-), or has no effect on cash; (b) what other account beside Cash is affected in the transaction; and (c) whether the transaction should be classified as an operating activity, investing activity, financing activity, or noncash investing and financing activity. The first one has been done for you as an example. A list of transactions is below: arch 1. 2. 3. 4. 5 Provided services to a customer. Repaid a bank loan. Paid interest on the bank loan. Purchased equipment. Collected one of the accountr.rocnivable 8: (a) Cash + > > > Equipment Bank loan payable Sales Interest expense Service revenue Common shares Land/common shares Dividends payable Accounts receivable Salaries expense (c) Classification Operating activity Rain to stoparrow_forwardSUBJECT: Financial Accounting and Reporting Instruction: Choose the Debit and Credit Accounts of the following transactions. TRANSACTION: Opened an account with Bank and made initial deposit1. Debit *a. Cash In Bankb. Accounts Receivablec. Unused Laundy Suppliesd. Prepaid Insurancee. Equipmentf. Accounts Payableg. Unearned Incomeh. Amora, Drawingi. Amora, Capitalj. Service Incomek. Salaries ExpenseL.Taxes and Licensesm.Transportation 2. Credit *a. Cash In Bankb. Accounts Receivablec. Unused Laundy Suppliesd. Prepaid Insurancee. Equipmentf. Accounts Payableg. Unearned Incomeh. Amora, Drawingi. Amora, Capitalj. Service Incomek. Salaries ExpenseL.Taxes and Licensesm.Transportation TRANSACTION: Bought Equipment on Account3. Debit *a. Cash In Bankb. Accounts Receivablec. Unused Laundy Suppliesd. Prepaid Insurancee. Equipmentf. Accounts Payableg. Unearned Incomeh. Amora, Drawingi. Amora, Capitalj. Service Incomek. Salaries ExpenseL.Taxes and Licensesm.Transportation 4. Credit *a. Cash In…arrow_forwardFalcon Incorporated has the following transactions with Wildcat Corporation. Transactions Falcon’s Related Account 1. Falcon purchases common stock of Wildcat. 2. Falcon borrows from Wildcat by signing a note. 3. Falcon provides services to Wildcat. 4. Falcon pays interest to Wildcat on borrowing. Investment Notes payable Service revenue Interest expense Required:1. For each transaction, indicate whether Falcon would report the related account in the balance sheet or income statement.2. For accounts in the balance sheet, indicate whether it would be classified as an asset, liability, or stockholders’ equity. For accounts in the income statement, indicate whether it would be classified as a revenue or an expense.3. Indicate whether each transaction is classified as operating, investing, or financing activity.arrow_forward
- The business collected $1,800 cash from Client B on account. The journal entry to record this transaction should include: A. Debiting Cash for $1,800 and Crediting Service revenue for $1,800 B. Debiting Accounts payable for $1,800 and Crediting Cash for $1,800 C. Debiting Cash for $1,800 and Crediting Accounts receivable for $1,800. D. Debiting Accounts receivable for $1,800 and Crediting Cash for $1,800arrow_forwardThe accountant for Tom's Tax Preparation, Inc. recorded a transaction by debiting Accounts Payable and crediting Cash. Which of the following transactions did the account record? Group of answer choices A. The purchase of supplies on account. B. Payment to suppliers for goods originally purchased on account. C. Receiving cash from suppliers. D. Receipt of payment for services originally provided to customers on account.arrow_forward1. A chart of accounts is A. used in place of a ledger B. usually a listing of accounts in financial statement order C. the same as a balance sheet D. usually a listing of accounts in alphabetical order 2. Which of the following financial statements reports information as of a specific date? A. balance sheet B. statement of cash flows C. retained earnings statement D. income statement 3. Cash investments made by the owner in the business are reported on the statement of cash flows in the A. investing activities section B. supplemental statement C. financing activities section D. operating activities section 4. If a shareholder wanted to know how money flowed into and out of the company, which financial statement would the shareholder use? A. income statement B. statement of cash flows C. statement of retained earnings D. balance sheet 5. The debit side of an account A. is the left side of the account B. can be either side of the account depending on how the accountant…arrow_forward
- Applying Financial Statement Linkages to Understand TransactionsConsider the effects of the independent transactions, a through g, on a company's balance sheet, income statement, and statement of cash flows. Complete the table below to explain the effects and financial statement linkages. Refer to Exhibit 2.10 as a guide for the linkages.a. Owners invested cash in the company in exchange for shares of common stock.b. The company received cash from the bank for a loan.c. The company purchased equipment to manufacture goods for sale and paid with cash.d. The company manufactured a custom piece of inventory and paid cash for materials and labor. The company sold the inventory for more than cost, and the customer promised to pay for the inventory in 30 days.e. The company paid monthly rent for a manufacturing space.f. The company paid cash dividends to the owners.g. The company received cash from the customer in transaction d.To indicate the account increases (+), enter "1" in the answer…arrow_forwardWhich of the following should be recorded in Accounts Receivable? Group of answer choices Receivables from subsidiaries resulting to a loan made to a subsidiary. Sale of goods on to a customer receiving cash and a promissory note. Receivables from officers who availed services in normal course of business. Dividend receivable as a result of cash dividends declared.arrow_forwardBelow are typical transactions for Caterpillar Inc.Type of Business Activity Transactions 1.____________ Pay for advertising. 2. ____________ Pay dividends to stockholders. 3. ____________ Collect cash from customer for previous sale. 4. ____________ Purchase a building to be used for operations. 5. ____________ Purchase equipment. 6. ____________ Sell land. 7. ____________ Receive a loan from the bank by signing a note. 8. ____________ Pay suppliers for purchase of supplies. 9. ____________ Provide services to customers. 10.____________ Invest in securities of another company.Required: Indicate whether each transaction is classified…arrow_forward
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