Question

Use the following table to show the effects of transactions 1-10. Use + or - and the dollar amount to show the effects. If a transaction affects only one cell, show the dollar amount and both + and -. The transactions describe events for Copymaster Corporation, a photocopying business. Assets Liabilities Equity 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 1. Shareholders invested $5,000 cash to begin the business. 2. Copymaster bought a copying machine for $1,500 cash. 3. Copymaster sold copies to customers for $500 cash. 4. Copymaster produced copies for Fellows Corporation, its customer. The total sale amount was $1,200. Copymaster agreed to bill Fellows for the sale at the end of the month. 5. Copymaster paid employees $600. 6. Copymaster bought supplies for $300. 7. Copymaster paid rent of $700. 8. Copymaster paid utilities of $200. 9. Copymaster bought office furniture for $500. 10. Copymaster had an unpaid phone bill at month-end for $100. 31

Answer 1

Accounting equation is assets = liabilities + equity

Also, remember net income is calculated as revenue - expenses and is added to equity.

So the equation can be further extended as assets = liabilities + equity + net income

Assets (amounts in $)

Liabilities + Equity (amounts in $)

(+) Net income (amount in $)

cash

accounts receivable

supplies

copying machine

office furniture

accounts payable

common stock

revenue

(-) expenses

service revenue

salary expense

rent expense

utilities expense

phone bill

received cash

(+) 5000

(+) 5000

purchase of copying machine

(-) 1500

(+) 1500

sold copies for cash

(+) 500

(+) 500

credit sales

(+) 1200

(+) 1200

paid to employees

(-) 600

(+) 600

purchase of supplies

(+) 300

(+) 300

paid rent

(-) 700

(+) 700

paid utilities

(-) 200

(+) 200

prchase of office furniture

(-) 500

(+) 500

unpaid phone bill

(+) 100

(+) 100

Balance

2000

1200

300

1500

500

400

5000

1700

600

700

200

100

Assets	Amount in $			Liabilities + Equity + Net income	Amount in $
cash	2000			accounts payable	400
accounts receivable	1200			common stock	5000
supplies	300			net income	100
copying machine	1500
office furniture	500
Total	5500			Total	5500

Net Income	Amount in $
revenue	1700
salary expense	-600
rent expense	-700
utilities expense	-200
phone bill	-100
Total	100