Question

P2-3A. Transaction Analysis Grand Appraisal Service provides commercial and industrial appraisals and feasibility studies. On January 1, the assets and liabilities of the business were the following: Cash, $11,700; Accounts Receivable, $15,800; Accounts Payable, $600; and Notes Payable, $3,500. Com- mon Stock had a balance of $18,400. Assume that Retained Earnings as of January 1 were $5,000. The following transactions occurred during the month of January: 1 Paid rent for January, $950. 2 Received $8,800 payment on customers' accounts. 3 Paid $750 on accounts payable. 4 Received $2,500 for services performed for cash customers. Borrowed $5,000 from a bank and signed a note payable for that amount. 6 Billed the city $6,200 for a feasibility study performed; billed various other credit customers, $1,900. 7 Paid the salary of an assistant, $3,500. 8 Received invoice for January utilities, $410. 9 Paid $6,000 cash for employee salaries. 10 Purchased a van (on January 31) for business use, $7,200. 11 Paid $150 to bank as January interest on the outstanding notes payable. Required a. Set up an accounting equation in columnar form with the following individual assets, liabilities, and stockholders' equity accounts: Cash, Accounts Receivable, Van, Accounts Payable, Notes Payable, Common Stock, and Retained Earnings. Enter the January 1 balances below each item. (Note: The beginning Van account balance is $0.) b. Show the impact (increase or decrease) of transactions 1-11 on the beginning balances, and total the columns to show that assets equal liabilities plus stockholders' equity as of January 31.

Answer 1

Answer =) Net Income Income Statement Liabilities Balance sheet (+) Total Equity | Balance sheet Step 1: Total Asset Balance sheet 11,700.00 15,800.00 Date Transaction: 1st January 01-Jan Cash 01-Jan Accounts Receivable 01-Jan Accounts Payable 01-Jan Notes Payable 01-Jan Common Stock 01-Jan Retained Earnings Total 600.00 3,500.00 18,400.00 5,000.00 23,400.00 27,500.00 (=) | 4,100.00 (+)|

Step 2: Increase or decrease in transaction Date Transaction: Net Income Total Asset =) Liabilities (+) Total Equity 1 Paid Rent for January Rent (950.00) $ (950.00) $ 950.00) $ $ 8,800.00 (8,800.00) Cash 2 Received $8800 payment on customers' account Cash Accounts Receivable 3 Paid $750 on account payable Cash Accounts Payable 4 Received 2500 for services performed for cash customers Cash Revenue $ (750.00) $ (750.00) $ 2,500.00 2,500.00 $ 2,500.00

$ 5,000.00 $ 8,100.00 ------- ---------- --------- --- (3,500.00) Borrowed 5000 from bank and signed a note payable for that amount Cash $ 5,000.00 Notes Payable Billed the city 6200 for a feasibility study performed; billed various other credit customers 1900 Revenue 8,100.00 Accounts Receivable $ 8,100.00 Paid the salary for an assistant Cash $ (3,500.00 Salary (3,500.00) Received invoice for January utilities 410 Utilities (410.00) Accounts Payable Paid 6000 cash for employees salaries Cash (6,000.00) Salary (6,000.00) Purchased a van (on January 31) for business use 7200 Cash (7,200.00) Vehicle 7,200.00 (410.00) (6,000.00)

Paid 150 to bank as January interest on the outstanding note payable Bank Interest Cash (150.00) (150.00) (150.00) Total Transaction (410.00) 4,250.00 4,660.00 (410.00) Step 3: Net Income Liabilities (+) Total Equity Total Asset le 9,450.00 15,100.00 7,200.00 31st January Date Transaction: 31-Jan Cash 31-Jan Accounts Receivable 31-Jan Vehicle 31-Jan Accounts Payable 31-Jan Notes Payable 31-Jan Common Stock 31-Jan Retained Earnings Total 260.00 8,500.00 18,400.00 4,590.00 22,990.00 31,750.00 8,760.00