Question

Larry Bar opened a frame shop and completed these transactions:

1. Larry started the shop by investing $41,500 cash and equipment valued at $19,500 in exchange for common stock.
2. Purchased $220 of office supplies on credit.
3. Paid $2,700 cash for the receptionist's salary.
4. Sold a custom frame service and collected $6,000 cash on the sale.
5. Completed framing services and billed the client $350.

What was the balance of the cash account after these transactions were posted?

Answer 1

Determination of the Cash Balance : Particulars Opening Cash Balance Add : Cash Invested in Business $ $ Less : Supplies purchased on Credit $ Explanation - It is newly started business. So, Opening Balance is NIL. 41,500 Cash brought into business. So, the cash balance is increased. Since the supplies are purchased on credit. Cash balance does not decrease. (2,700) Cash is paid. So, the cash balance decreases. 6,000 Cash has been collected on sale. So, the cash balance increases. Only the Bill is raised. So, the cash balance does not increase. 44,800 Less : Receptionist's Salary Add : Cash collected from Sale Add: Completed framing and billed the clients Closing Cash Balance $ $ $ $