Question

Required: 1. Analyze the effect of the January transactions (shown below) on the accounting equation, and indicate the account, amount, and direction of the effect (+ for increase and for decrease) of each transaction. (Enter any decreases to account balances with a minus sign.) a. Received $70,000 cash from customers for subscriptions that had already been earned in 2014 b. Received $190,000 cash from Electronic Arts, Inc for service revenue earned in January c. Purchased 10 new computer servers for $31,500; paid S16.500 cash and signed a three-year note for the remainder owed d. Paid $16,200 for an Internet advertisement run on Yahoo! in January e. Sold 19,300 monthly subscriptions at $13 each for services provided during January. Half was collected in cash and half was sold on account f Received an electric and gas utility bill for $6.010 for January utlity services The bill will be paid in February g. Paid $400,000 in wages to employees for work done in January h. Purchased $3,900 of supplies on account i. Paid $3.900 cash to the supplier in (h)

Answer 1

Working Sheet of Accounting Equation:
	Open. Bal.	a	b	c	d	e	f	g	h	i	Close Bal.	Net Income	Closing Bal. Sheet
Cash	2000000	70000	190000	-16500	-16200	125450		-400000		-3900	1948850		1948850
AR	187000	-70000				125450					242450		242450
Supplies	23900			31500					3900		59300		59300
Equipment	886000										886000		886000
Land	1660000										1660000		1660000
Building	463000										463000		463000
EXPENSES:
Salaries and Wages exp.								400000			400000	-400000	0
Advertising exp					16200						16200	-16200	0
Utilities exp							6010				6010	-6010	0
TOTAL ASSETS	5219900	0	190000	15000	0	250900	6010	0	3900	-3900	5681810	-422210	5259600
AP	130000						6010		3900	-3900	136010		136010
Unearned Rev	88000										88000		88000
Notes payable	70000			15000							85000		85000
CS	2300000										2300000		2300000
RE	2631900										2631900	18690	2650590
REVENUES:
Service Rev.			190000			250900					440900	-440900	0
TOTAL LIABILITIES	5219900	0	190000	15000	0	250900	6010	0	3900	-3900	5681810	-422210	5259600