Question

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Answer 1

Solution

At first, effects of these entries are needed to be checked. These are as follows,

Sl. No.	Particulars	L.F.	Amount ($)	Amount ($)	Overall Impact
			(Dr.)	(Cr.)
1	Cash A/c ……………. Dr.		44,500.00		Both Cash and Common Stock will be increased.
	To, Common Stock A/c			44,500.00
	(Being shareholders invested into business)
2	Equipment A/c ……………………. Dr.		27,600.00		Both Equipment and Accounts Payable will be increased
	To, Accounts Payable A/c			27,600.00
	(Being computer purchased on account)
3	Rent Expenses A/c ………………………… Dr.		5,600.00		Cash will be decreased, and expenses will increase.
	To, Cash A/c			5,600.00
	(Being rent paid)
4	Accounts Receivable A/c ………………………. Dr.		18,700.00		Both Accounts Receivable and Revenue will increase
	To, Service Revenue A/c			18,700.00
	(Being service performed on account)
5	Cash A/c ………………………. Dr.		3,800.00		Both Cash and Revenue will increase
	To, Service Revenue A/c			3,800.00
	(Being service performed in cash)
6	Utility Expenses A/c …………. Dr.		6,200.00		Cash will be decreased, and expenses will increase.
	To, Cash A/c			6,200.00
	(Being electricity charges were paid)
7	Accounts Payable A/c ………………….. Dr.		27,600.00		Both Accounts Payable and Cash will decrease
	To, Cash A/c			27,600.00
	(Being amount due on computers were repaid)
8	Advertising Expenses A/c ………………. Dr.		2,000.00		Both Accounts Payable and Expenses will increase
	To, Accounts Payable A/c			2,000.00
	(Being advertising expenses were incurred on account)
9	Cash A/c ……………………… Dr.		10,100		Cash will increase, and Accounts Receivable will decrease
	To, Accounts Receivable A/c			10,100
	(Being cash recovered from debtors)

Now, the solution will be as follows,

	Assets					=	Liabilities	+	Stockholders' Equity
	Cash	+	Accounts Receivable	+	Equipments	=	Accounts Payable	+	Common Stock	+	Retained Earnings
											Revenues	-	Expenses
1	$    44,500.00					=			$   44,500.00
2					$   27,600.00	=	$    27,600.00
3	$     -5,600.00					=							$       5,600.00	Rent Expenses
4			$    18,700.00			=					$   18,700.00			Service Revenue
5	$       3,800.00					=					$     3,800.00			Service Revenue
6	$     -6,200.00					=							$       6,200.00	Utility Expenses
7	$   -27,600.00					=	$   -27,600.00
8	$     -2,000.00					=							$       2,000.00	Advertising Expenses
9	$    10,100.00		$   -10,100.00			=
	$    17,000.00		$       8,600.00		$   27,600.00	=	$                    -		$   44,500.00		$   22,500.00		$    13,800.00