Question

The Hughes Tools Company started business on October 1, 2019. Its fiscal year runs through to September 30 the following year. The following transactions occurred in the fiscal year that started on October 1, 2019, and ended on September 30, 2020.

1.		On October 1, 2019, Jill Hughes invested $179,000 to start the business. Hughes is the only owner. She was issued 10,000 common shares.
2.		On October 1, Hughes Tools borrowed $225,000 from a venture capitalist (a lender who specializes in start-up companies) and signed a note payable.
3.		On October 1, the company rented a building. The rental agreement was a two-year contract requiring quarterly rental payments (every three months) of $11,500, payable in advance. The first payment was made on October 1, 2019 (covering the period from October 1 to December 31). Thereafter, payments were due on December 31, March 31, June 30, and September 30 for each three-month period that followed. All the rental payments were made as specified in the agreement.
4.		On October 1, the company purchased equipment costing $229,900 for cash.
5.		Initial inventory was purchased for $90,500 cash.
6.		Additional purchases of inventory during the year totalled $574,500, all on account.
7.		Sales during the year totalled $851,000, of which $765,900 were on account.
8.		Collections from customers on account totalled $654,500.
9.		Payments to suppliers on account totalled $516,000.
10.		The cost of the inventory that was sold during the year was $554,500.
11.		Selling and administrative expenses totalled $87,200 for the year. Of this amount, $5,200 was unpaid at year end.
12.		Interest on the note payable from the venture capitalist was paid at year end (September 30, 2020). The interest rate on the note is 10%. In addition, $26,600 of the note principal was repaid at that time.
13.		The equipment was depreciated based on an estimated useful life of 10 years and a residual value of $20,900.
14.		The company declared and paid a dividend of $5,900. Show the effects of the transactions on the basic accounting equation. (If an amount reduces the account balance then enter with negative sign. Indicate whether it is Revenue, Expense or Dividend declared in the last column. In case if there is no effect then select "Not Applicable".) cash,account receivable, prepaid rent, inventory,equipment, account payable, note payable, common shares, retained earnings

Answer 1

Accounting equation:
trans.	Assets					=	Liabilities +		Stockholders' Equity
	Cash +	AR +	Prep. Rent +	Inventory +	Equipment	=	AP +	Note Pay +	Comm Shares +	Retained Earn
1	179000					=			179000
2	225000					=		225000
3	-11500		11500			=
4	-229900				229900	=
5	-90500			90500		=
6				574500		=	574500
7	85100	765900				=				851000
8	654500	-654500				=
9	-516000					=	-516000
10				-554500		=				-554500
11	-82000					=	5200			-87200
12 - No entry						=
13					-20900	=				-20900
14	-5900					=				-5900
Balance	207800	111400	11500	110500	209000	=	63700	225000	179000	182500
G. Total					650200	=	650200