Question

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Stacey's Piano Rebuilding Company has been operating for one year. At the start of the second year, its income statement accounts had zero balances and its balance sheet account balances were as follows:

Cash	$	6,700	Accounts payable	$	8,800
Accounts receivable		30,700	Unearned revenue		3,140
Supplies		1,540	Long-term note payable		47,600
Equipment		9,600	Common stock		1,640
Land		8,000	Additional paid-in capital		6,560
Building		26,800	Retained earnings		15,600

1. Rebuilt and delivered five pianos in January to customers who paid $19,000 in cash.
2. Received a $510 deposit from a customer who wanted her piano rebuilt.
3. Rented a part of the building to a bicycle repair shop; received $860 for rent in January.
4. Received $7,800 from customers as payment on their accounts.
5. Received an electric and gas utility bill for $430 to be paid in February.
6. Ordered $910 in supplies.
7. Paid $1,940 on account in January.
8. Received from the home of Stacey Eddy, the major shareholder, a $920 tool (equipment) to use in the business in exchange for 110 shares of $1 par value stock.
9. Paid $14,700 in wages to employees who worked in January.
10. Declared and paid a $2,200 dividend (reduce Retained Earnings and Cash).
11. Received and paid cash for the supplies in (f).

3. Using the data from the T-accounts, amounts for the following at the end of January of the second year, were:

1)Revenue-expense=net income

Ans:

1)_______-_______=_________

2) Assets=Liabilities+stockholders equity

2)__________=_________+_________

Answer 1

1) Revenue-expense=net income

$19,860-$15,130=$4,730

2) Assets=Liabilities+stockholders equity

$85,790 =58,540+27,250

Workings

1. Rebuilt and delivered five pianos in January to customers who paid $19,000 in cash - this transaction increases cash, increases revenues, increases equity
2. Received a $510 deposit from a customer who wanted her piano rebuilt - this transaction increases cash, increases unearned revenue liability
3. Rented a part of the building to a bicycle repair shop; received $860 for rent in January - this transaction increases cash, increases revenues, increases equity
4. Received $7,800 from customers as payment on their accounts - this transaction increases cash, decrease accounts receivables
5. Received an electric and gas utility bill for $430 to be paid in February - this transaction increases expense, increases accounts/utilities payable liability
6. Ordered $910 in supplies - this transaction does not impact the accounting equation
7. Paid $1,940 on account in January - this transaction decreases cash, decreases accounts payable
8. Received from the home of Stacey Eddy, the major shareholder, a $920 tool (equipment) to use in the business in exchange for 110 shares of $1 par value stock - this transaction increases equipment (asset), increases equity (common stock and addtional paid in capital)
9. Paid $14,700 in wages to employees who worked in January - this transaction increases expense, decreases equity and decreases cash
10. Declared and paid a $2,200 dividend (reduce Retained Earnings and Cash) - this transaction decreases equity, decreases cash
11. Received and paid cash for the supplies in (f) - this transaction increases assets (supplies), decreases assets (cash)

To solve such questions we can capture the data in a tabular format:

A B C D E F G 1 Date of Transaction ASSETS LIABILITIES EQUITY REVENUES EXPENSE NET INCOME 2 Beginning Balance =6700+30700+1540+9600+8000+26800 =8800+3140+47600 =1640+6560+15600 O 0 10 3 Rebuilt and delivered five pianos 19000 19000 19000 19000 4 Deposit from customer 510 510 5 Rent received 860 860 860 860 6 Payment from customer =-7800+7800 7 Utility Bill 430 -430 430 -430 8 Ordered Supplies 9 Payment towards payables - 1940 -1940 10 Received from Stacey Eddy 920 920 11 Payment of Wages - 14700 - 14700 14700 -14700 12 Dividends paid -2200 -2200 13 Payment towards payables =910-910 14 TOTAL =SUM(B2:313) =SUM(C2:C13) =SUM(D2:013) -SUM(E2:E13) =SUM(F2:F13) SUM(G2:13)

Date of Transaction ASSETS LIABILITIES EQUITY REVENUES EXPENSE NET INCOME Beginning Balance 83,340 59,540 23,800 Rebuilt and delivered five pianos 19,000 19,000 19,000 19,000 Deposit from customer 510 510 Rent received 860 860 860 860 Payment from customer Utility Bill 430 -430 430 -430 Ordered Supplies Payment towards payables -1,940 -1,940 Received from Stacey Eddy 920 920 Payment of Wages -14,700 -14,700 14,700 -14,700 Dividends paid -2,200 -2,200 Payment towards payables TOTAL $85,790 $ 58,540 $ 27,250 $ 19,860 $ 15,130$ 4,730

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