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Chapter 02 Homework Part II Application

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The Accounting Equation
Dr. John Salvaggi is a chiropractor. As of December 31, he owned the following property that related to his professional practice.
Cash $3,417Office Equipment 6,310X-ray Equipment 10,177Laboratory Equipment 6,960
He also owes the following business suppliers:
Chateau Gas Company $3,552Aloe Medical Supply Company 4,084
Required:
1. From the preceding information, compute the accounting elements and enter them in the accounting equation shown as follows.
Assets = Liabilities + Owner's Equity$ $ $
2. During January, the assets increase by $8,419, and the liabilities increase by $3,409. Compute the resulting accounting equation.
Assets = Liabilities + Owner's Equity$ $ $
3. During February, the assets decrease by $3,360, and the liabilities increase by $2,077. Compute the resulting accounting equation.
Assets = Liabilities + Owner's Equity$ $ $

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Answer 1

Answer

The three major elements of accounting are: Assets, Liabilities, and Capital(Owner's Equity).

Accounting Equation:

Assets = Liabilities + Owner's Equity

In this case Assets and liabilities is given, using accounting equation Owner's equity will be calculated.

1)

Assets	Amount
Cash	$3,417
Office Equipment	$6,310
X-ray Equipment	$10,177
Laboratory Equipment	$6,960
Total Assets	$26,864

Liabilities	Amount
Chateau Gas Company	$3,552
Aloe Medical Supply Company	$4,084
Total Liabilities	$7,636

Assets = Liabilities + Owner's Equity

$26,864 = $7,636 + Owner's Equity

Owner's Equity = $19,228

2)

During January, the assets increase by $8,419, and the liabilities increase by $3,409

Assets = $26,864 + $8419 = $35,283

Liabilities = $7,636 + $3,409 = $11,045

Assets = Liabilities + Owner's Equity

$35,283 = $11,045 + Owner's Equity

Owner's Equity = $24,238

3)

During February, the assets decrease by $3,360, and the liabilities increase by $2,077

Assets = $35,283 - $3,360 = $31,923

Liabilities = $11,045 + $2,077 = $13,122

Assets = Liabilities + Owner's Equity

$31,923 = $13,122 + Owner's Equity

Owner's Equity = $18,801