Question

Carla Vista Computer Corporation had the following opening account balances at the end of April: Cash $4,500; Accounts Receivable $8,000; Accounts Payable $2,500; Common Shares $5,000; and Retained Earnings $5,000. It entered into the following transactions during the month of May:

1.		Purchased equipment on account for $7,500.
2.		Paid $1,100 for rent for the month of May.
3.		Provided computer services for $4,000 on account.
4.		Paid Ontario Hydro $400 cash for utilities used in May.
5.		Borrowed $20,100 from the bank.
6.		Paid supplier for equipment purchased in transaction 1.
7.		Purchased a one-year accident insurance policy for $500 cash.
8.		Received $3,100 cash in partial payment of the account owed in transaction 3.
9.		Declared and paid $500 of dividends to shareholders.
10.		Paid income tax of $250 for the month.

Prepare an equation analysis of the effects of the opening balances and above transactions on the expanded accounting equation. (If a transaction causes a decrease in Assets, Liabilities or Shareholders' Equity, place a negative sign (or parentheses) in front of the amount entered for the particular Asset, Liability or Equity item that was reduced. See Illustration 3.3 for example.)

Answer 1

Equation Analysis
	Cash +	Accounts +	Prepaid   +	Equipment =	Accounts+	Bank Note+	Common +	Retained	Revenue -	Expense=	Net Income	Explanations
		Receivable	Insurance			Payable	Payable	Stock	Earnings
Beg. Bal.	4,500	8,000				2,500		5,000	5,000
1				7,500		7,500
2	-1,100								-1,100		1,100	-1,100	Rent expense paid
3		4,000							4,000	4,000		4,000	Computer service revenue earned
4	-400								-400		400	-400	Utilities expense paid
5	20,100						20,100
6	-7,500					-7,500
7	-500		500
8	3,100	-3100
9	-500								-500				Dividend paid
10	-250								-250		250	-250	Income tax expense paid
End. Bal.	17,450	8,900	500	7,500		2,500	20,100	5,000	6,750	4,000	1,750	2,250